The PMO, maturity and competitive advantage

Abstract

The Project Management Office (PMO) as a construct was used within organizations with great regularity from the mid- to late 1990s. Since then, practitioners and researchers have studied various aspects of the PMO — from the value it brings to the organization in terms of ROI to the differing forms it takes across organizations; to the changes it goes through even within a single organization. In this session, we discuss some of those findings and look at the relationship between the existence and operation of a PMO and the firm's Project Management Maturity (PMM). We also talk about the findings as they relate to the role that both the PMO and PMM play in promoting project management and management by projects as a business concept with the ultimate effect on the competitive advantage of the firm.

Introduction – The PMO

As firms try to do more with less, they are turning to project portfolio management as a means of carefully selecting their projects and assigning scarce resources to those critical initiatives deemed most critical. The PMO has been one of the outcomes of this push to adopt the discipline.

The PMO as an organizational construct has been appearing in organizations with increasing regularity since the late 1990s. The offices have also been the focal point of many studies and reports as professionals, practitioners and academics try to explain,; describe, or categorize the PMO. The breadth of study of the PMO is as varied as the PMO itself.

The study and attention being paid to the PMO has been on the increase, with examination taking place on five very broad levels:

• Structural characteristics of the PMO
• Roles and functions
• Organizational context
• Types of projects in the PMO’s mandate
• Perceived value of the PMO

In the most common and perhaps original use of the acronym, “PMO” stands for “Project Management Office,” which was defined by Project Management Institute (PMI) as “An organizational body or entity assigned various responsibilities related to the centralized and coordinated management of those projects under its domain.” (PMI, 2013)

Today, however, the variety in form and function of the PMO has given rise to variations in the name of the organizational body that performs similar centralized project management activity. These various names include: Program Management Office; Portfolio Management Office; Project Monitoring Office; Project Office; Project Portfolio Office.

In essence, the PMO is an organizational entity established to provide coordination or support for management of a number of projects or programs.

PMOs are established to address several needs of the project managers and other stakeholders within the organization. These include:

• Project managers not getting the information they need to manage their projects
• Management not getting accurate forecasts of completion data
• Inconsistent understanding of expectations as it relates to project objectives and performance

The study of the PMO is being done from two directions, much like the field of project management itself. Project Management has been said to be evolving in 2 directions - from the academic and the practical (Crawford L. , 2006). Practitioners argue that academics are making the field too theoretical, while academics claim that the field lacks theoretical foundations

Functions of the PMO

PMOs typically perform a number of functions, including project definition and planning; cost/benefit analysis of projects; risk management; monitoring and control; supply of experience and knowledge; support in undertaking project management processes and procedures; knowledge capture and dissemination; provision of specialist skills; maintenance of projects tools; standards and processes.

In one of the most comprehensive reports on the PMO, which was done by the University of Montreal and in conjunction with PMI in 2010, the authors who surveyed over 500 PMOs were able to categorize the PMO functions into as many as 27 different functions. The book was by (Hobbs & Aubrey, 2010). They examined how PMOs are structured and what functions they fill. They found that PMOs change every few years. For manageability of their research, the functions were grouped into four categories

• Group 1
  • Monitoring and Controlling Project Performance
• Group 2
  • Development of Project Management Competencies and Methodologies
• Group 3
  • Multi-project Management
• Group 4
  • Strategic Management
• Group 5
  • Organizational Learning

The roles and functions of the PMO can be described at three different levels: the strategic, the tactical and the operational (Souza & Evaristo, 2006).

Strategic: (Ensure that projects are aligned with)

• Strategic objectives of the organization
• Strategic growth of the organization
• Efficient and effective knowledge management

Tactical:

• Close integration between project initiatives
• Consistent quality of products and services generated by projects
• Knowledge sharing

Operational:

• Conducting project evaluations
• Integration of knowledge derived from projects
• Constant monitoring of custom satisfaction

The PMO and Organizational Project Management

The PMO as a concept got its start as organizations moved from a focus of effectively delivering a single project to the idea of leveraging synergies that would allow them to repeatedly produce results on their projects. The lure of the PMO is also strengthened by the fact that projects are often defined as the vehicle through which firms execute their strategy, so central coordination, management and monitoring of these projects is essential.

Aubry, Hobbs, and Thuillier (2007) proposed that the PMO is part of a network of complex relations that links strategy, projects and structures and thus is a point of entry into the organization to study the foundations of organizational project management. Organizational project management can be defined as the alignment and systematic management of project, programs and portfolios to achieve strategic organizational objectives. They considered the concept of organizational project management as the missing link required to integrate all parts of project management as a true field of organizational management. The PMOs provided a means of investigating organizational project management, as these bodies typically act as a focal point of project management activity within an organization.

The PMO is thus a natural evolution in project management as the focus shifts from looking at the single to looking at what is done at the organizational level. This evolutionary link was explored by authors as a means of examining the overall development of the firms. Concepts of project management have evolved from the use of tools to manage single projects to those that reflect project management as an organizational capacity.

PMOs have been structured and perform differently within different organizations. This changing or dynamic nature of the PMO has led to studies aimed at examining the organizational environment in which PMOs exists and some authors have even used the PMO as the tool or key to analyzing organizational change.

Work on the PMO has also been detailed by authors such as Dinsmore, Aubrey, and Hobbs. In several books and papers, they have examined the importance of the PMO as well as highlighted the importance of determining the appropriate structure for the host organization. Some authors have taken a historical approach to the study of the PMO (Aubry, Hobbs, & Thuillier, 2008). These same authors proposed the study of the PMO as the starting point for the development of organizational or organization-wide project management activity, as project activity tends to be concentrated and more visible in these organizations.

Researchers have also sought to develop typologies that categorize the PMO. Common PMO typologies included those by Dinsmore (1999) who categorized the single-project entity; the project support office; project management center of excellence and the program management office. The Gartner typology of 2000 included three categories: the project repository, coach, and enterprise.

In addition to PMO definition and typology, another common theme found in the research and reports on the PMO, is that the entities are continually redefined throughout their life cycles within an organization. This is supported by the finding that PMOs are relatively young, with over half (53%) being less than 2 years old. PMOs emerge and are shut down, and then potentially re-emerge (Aubry & Hobbs, 2011). Their research proved overall that PMOs: (1) are diverse; (2) are expected to justify their value added; (3) are formed, disbanded and then potentially re-formed; and (4) should be expected to go through change.

Pellegrinelli and Garagna (2009) also noted that PMOs are an organizational construct, created in response to a perceived need, and as that need is progressively addressed, the relevance and value of the PMO decreases. PMOs must therefore continually be evaluated and reconfigured to meet the new needs of the organization.

The authors examined the historical process to provide a better basis for the development of a theory on PMOs and more globally on organizational project management. Among their findings, it was determined that the production of a typology difficult, if not impossible as even within a single organization there were approximately three to four different forms of PMO per decade. This occurs because PMOs adapt to their environment. Therefore in order to understand a PMO one should take into account the context in which the PMO is located and the evolution of this context.

This change from focus on the individual project and practitioner to project management as an organizational capability reflects the wider adoption of project management (Crawford, 2006). The prevalence of PMOs therefore can be interpreted as an increase in the importance seen in project management done at the organizational or strategic level.

Project Management Maturity

The concept of maturity is used to describe the state of an organization's effectiveness at performing certain tasks. Maturity models “seek to do for organizations seeking to implement strategy through projects what ‘bodies of knowledge’ have done for individual practitioners seeking to improve their ability to manage projects” (Cooke-Davies, 2004).

There are several maturity models in existence. Most of these models originated in the software engineering industry. The Software Engineering Institute (SEI) developed the first Capability Maturity Model (CMM). The model looked at how organizations can move from obtaining great results based on the effort of a single developer to how structures could be put in place to support repeated and continually improving development practices. A similar approach can be put to work for organizations with respect to project management - moving from a single project manager to repeated and improving processes at the organizational level.

The generic levels commonly used within the project management community fall in line with the following:

1. Initial Process – Ad hoc processes
2. Structured Processes and Standards – Basic processes used on some projects
3. Organizational Standards and Institutionalized Process - All processes standard for all processes; repeatable
4. Managed Process – Project management processes integrated with corporate processes
5. Optimizing Process – Focus on continuous improvement

Any good model for the measurement of project management maturity creates a strategic plan for moving project management forward in an organization (Crawford, 2006).

The relationship between the PMO and the project management maturity of an organization is a bi-directional one. The conclusion of some research is that the PMO is a catalyst for increasing the PMM, and that the PMO facilitates improvement in project management maturity by being the focal point for consistent application of processes and methodologies. Others have argued that it is the more mature firms that are able to effectively utilize the PMO as a tool. That is, the PMO is the result of a maturation process.

In any event, the PMO does reflect a certain view of project management. The existence of a PMO is an indication that the organization is ready to move beyond the individual management skills and towards a view that takes an organizational view. Thus, as discussed above, the PMO is the base of organizational project management. In many maturity models, this is a sign of maturity and so the PMO can be deemed the result of a mature or maturing organization.

Models not only help define the current state of project management, they provide a roadmap and a series of key steps that the firm can follow as it attempts to go from one level to the next. This is a key area where research has found that the PMO can add value. By taking control and responsibility for monitoring project management activity and setting the standards required to move the organization forward, the PMO can act as an enabler or growth agent — or at least a sustaining agent for the current level of maturity.

PriceWaterhouseCoopers (PWC) in their report that examined project management maturity and business performance utilized the following for their maturity model (PriceWaterHouseCoopers, 2007):

1. Unreliable processes:

• Sporadic use of project management. Formal documentation and the knowledge of the standards of project management are lacking. No training. Little organizational support.

2. Informal processes:

• A formally approved project management methodology is lacking. Basic processes; not standard on all projects. Project participants are informed about project management standards, but do not apply these standards appropriately. Lessons learned are not gathered.

3. Standardized processes:

• A project management methodology is developed, approved and used. Project participants are informed about project management standards. Most projects are implemented using these standards. Management supports the use of standards. Focus on individual projects

4. Monitored processes:

• An integrated project life cycle methodology is used. Application of the standard set is monitored and fixed for all projects. Projects support the strategic plan. Project benefits are tracked. Internal training is in place. Project office is established.

5. Optimized processes –

• A regular analysis and renewal of the existing project management methodology is conducted. Lessons learned files are created. Knowledge transferred. Process in place to improve project performance. Management focuses on continuous improvement.

PMI has also developed and championed an organizational maturity model, the OPM3, which was originally designed as a guide to creating organizational environments to support the management of projects (PMI, 2008). The four stages of Standardize, Measure, Control, and Continually Improve are used to evaluate the maturity of project, program, and portfolio management practices at the organizational level.

The role played by the PMO and project management maturity within the organization was stressed in the report by (Hobbs & Aubry, 2010). Their research found that there were two organizational level characteristics by which the PMOs could be examined. One was organizational supportiveness and the other was the level of project management maturity.

Competitive Advantage

What is the purpose of deploying project management, improving project delivery, or improving project management maturity?

As projects are often defined as the “means by which organizations” implement strategy, it can easily be understood that the purpose of project management is to improve the organization's competitive position. However, can project management as a strategic discipline — delivered through the PMO — give a firm an advantage over its competitors? Do firms with a higher level of project management maturity enjoy a competitive advantage? These are valuable and insightful questions for the project management researcher.

A firm is said to have a competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors (Barney, 1991). The competitive advantage is said to be sustained only if it continues to exist after efforts to duplicate that advantage have ceased. (Rumelt, 1984)

Many studies have been done into what leads to the competiveness of the firm. The initial industry based view of Michael Porter in the 1980s gave way to the Resource Based View (RBV), which gained ground in the 1990s. With the RBV, the focus was on the role played by the strategic resources and capabilities of a firm in providing a competitive advantage. Also, while the position of proponents of the RBV movement is that internal resources are a key component to being a competitive advantage, these resources must be “strategic”; to be considered as such, resources must be valuable, rare, imperfectly imitable and not strategically substitutable. Additionally, capabilities provide competitive advantage if they are dynamic. According to (Eisenhardt & Martin, 2000):

The firm's processes that use resources—specifically the processes to integrate, reconfigure, gain and release resources—to match and even create market change. Dynamic capabilities thus are the organizational and strategic routines by which firms achieve new resource configurations as markets emerge, collide, split, evolve, and die

In examining whether project management has a part to play in competitive advantage, we must examine the discipline against these concepts. Project management practiced under the umbrella of a PMO conceptualizes project management as an organizational capability. This was written about by authors, such as Crawford (2006) and Dinsmore (1996). Crawford (2006) examined the development of project management as an organizational capability and highlighted the role played by the PMO. This is certainly understandable because the PMO performs functions that seek to enhance operations at an organizational level.

When one considers the expanding role and focus of project management, we look at the functioning of the PMO, which typically operates at the organizational level and is involved in managing and coordinating activities for the entire portfolio of projects. This function of Project Portfolio Management (PPM) has been dealt with directly as a dynamic capability by (Killen & Hunt, 2013), who used the concept to propose a PPM capability maturity model.

According to (Killen & Hunt, 2013), PPM as performed by most PMOs can be considered as a dynamic capability due to its two roles: First, integrating, building, and reconfiguring resources; and, second, customizing other capabilities to suit the changing environment and to cater for different project types.

PPM is a collection of organizational processes that depend on the resource position of the organization. PPM is also said to demonstrate the required path dependency attribute required to provide competitive advantage. PPM capabilities need to be tailored to suit the particular environment, and organizations make modifications to PPM processes as they learn and advance through stages outlined in project management capability models as described earlier.

The recognition of PPM as a dynamic capability and with its emphasis on the optimization of internal resource usage, gives it a place in the discussion as providing firms with a competitive advantage.

Conclusion

The PMO as an entity is becoming of more interest as the field of project management evolves from techniques that deal with the management of a single project, to being one where the entire operation of the organization is considered. PMOs themselves can be complex entities as they tend to vary in structure and function from one organization to the next. Their role in providing strategic guidance, however, is in little question. The amount of guidance provided or the effect the PMO has on directing activities within the organization is driven by and reflects the level of Project Management Maturity. Many models exist to measure and map a road map, which can be followed to allow firms to go from ad hoc project management practices to a situation where processes are optimized for continuous improvement. The existence of these entities at the organizational level, gives project management the characteristics of an organizational capability. The existence of the maps in the form of maturity models, make the capability a dynamic one. This coupled with the common role of the PMO in providing a tool to better manage, monitor, and manipulate resources, gives the PMO and project management in general the ability to provide a firm with a competitive advantage.

The articles and reports reviewed provided excellent information on the study of PMO in theory and practice. The link with competitive advantage has also been explored and discussed to some extent. However, what has been lacking somewhat is empirical research examining this link more closely. The basic tenets for project management practices to provide a competitive advantage that can perhaps be sustained are there. Future research needs to be focussed on measuring and proving this conclusively.

Studies and Reports on the PMO

The importance of the PMO has been recognized; a fact that manifests itself in the myriad of studies and reports produced. In one of the reports, produced by (ESI International, 2013) the importance report states:

For decades, researchers have been trying to grapple with the concept of the Project/Program Management Office (PMO) and how it works to improve overall business performance. Because project management has become integral across all industries and sectors, the PMO plays a vital role in offering strategic, tactical or operational guidance in day-to-day business through its involvement in project and program delivery.

The following table lists a subset of the many reports and studies that have been done on various aspects of the PMO and Project Management Maturity. These have contributed to the content and direction taken in this paper.