Abstract
Once an organization decides to improve project management, making the logical case for a focal point—we'll call it a Project Management Office or PMO—to guide, promote and support the improvement effort isn't difficult to do. But, especially in these challenging economic times, as soon as the associated costs are examined, making the case becomes a lot harder. Selling the PMO to executives, and in particular the CFO, is like any sales proposition: It requires a focused approach with a good product, and knowing how to close the deal. The two keys lie in possessing a PMO structure that adds appropriate, measurable value to the organization, and in the ability to effectively articulate a case for funding in a highly competitive arena. This presentation will provide insight into structuring the business case for a PMO and considerations for PMO structure and value, and offer tips for presenting to executives.
Introduction
A case can be made in most organizations for improving project performance as a means to improve business success. However, successful project performance improvement doesn't happen without thorough and effective planning and support. In most organizations, when embarking on project management improvement, no focal point exists to bring together all of the related efforts that need to be coordinated for both short- and long-term success.
Project performance improvement is most effectively pursued by means of a programmatic approach, that is, through a series of related projects targeted to specific aspects of the project environment. Thus, the need for coordination, typically via a project management office (PMO), is in effect created as soon as the organization decides that project management improvement is needed and becomes aware of the breadth of the undertaking.
While the need for coordination isn't hard to see, sometimes the cost of that coordination becomes a stumbling block and a barrier to program success because the case isn't properly made. And, often there is a hazy definition of the scope or timing for the objectives of the PMO. Many “C” level executives, the Chief Financial Officer (CFO) included, will often view the allocation of resources to a centralized support function, such as the PMO, as overhead or waste. After all, wouldn't these resources be better spent on actually managing projects? The key selling concepts to support the concept of a PMO to the CFO, in particular, are:
- Efficiency of execution (cost management): A measureable result of defined processes, properly configured tools, and the on-going development of professional project managers.
- Process controls and metrics (quality and risk management): Management information requiring defined processes and reporting that are actually practiced by the PMs in the organization, and
- Effective use of human resources (human resource and cost management): Retention of high-performing personnel and ensuring that use of its capacity is well coordinated and fully utilized.
Improvement Program Components
It's worthwhile to consider the categories of action that may be needed to establish and maintain improved project performance. Attention must typically be paid to improving individual and organizational skills, adjusting and introducing improved processes and procedures, and implementing an appropriate set of standard support tools. These categories are frequently referred to (with good reason) using the manta, “people, process, tools,” and are summarized in Exhibit 1.
Exhibit 1. Comprehensive Approach to Project Performance Improvement
Under the heading of people, the development of a solid base of consistent project management capability through core skills training is a minimum essential action. In addition, the organization may also need to consider job/role descriptions, project categorization, and PM assignment schemes, certification programs, career ladders, and compensation to name a few items. Regardless of how the roadmap for the PMO is defined, keep in mind that employees tend to perform more effectively and mature in roles in which management provides training, clear expectations of measurable performance, and rewards, and a well-defined career path.
The process component of our mantra can have a very wide variety of components, and in some cases the placement of a component in the process or tools category can be somewhat arbitrary. Generally, this category includes actions such as defining or improving the project life cycle, and associated technical and management expectations. On the management side, standardized methodologies and performance goals are frequently developed to add specificity to management expectations. This may also apply to program and portfolio processes. When processes are improved, associated performance monitoring and control functions are also typically adjusted.
The tools category of action items can be highly controversial, as a function of people's personal experiences with various software support products and approaches. But, the importance of the use of a standard set of tools for describing requirements, planning work, developing schedules, and tracking performance cannot be overstated. Benefits include simplified training, better interchange of data and information, and easier movement of personnel. More sophisticated tools to track program and portfolio performance are also frequently included in this category.
In summary, the business case to sell the PMO to the CFO needs to be based on metrics that identify the value of such an organization, relative to the efficiency of execution, process controls, and effective use of human resources. Improvement of project management metrics is virtually impossible unless it's part of a defined process supported by effectively configured and supported tools, executed by properly trained PMs, and supported by a centralized function, such as a PMO.
Supporting the Improvement Program: The PMO Makeup
Having discussed the need for and value of a project management improvement program, and the key role provided by a centralized organization (the PMO) to coordinate the various projects and operations of the program, let's now consider the possible makeup of a PMO. Exhibit 2 provides a view of potential PMO functions divided into five categories.
Exhibit 2. Potential PMO Functions
When considering PMO functions, it's essential to understand the organizational landscape in terms of stakeholder knowledge and support, as well as expectations regarding the outcomes of the project management improvement program. What might make great sense to one person in terms of PMO mission and function may be considered a direct threat by another.
The decision process regarding PMO functionality should not only select functions, but also prioritize their importance to support an incremental approach to PMO implementation. Most organizations fare better if they “eat the cheese a bite at a time.”
A very big challenge for many organizations, and a significant reason for lack of PMO success, is the failure to decide at the outset how the PMO will be measured. Clearly, the more closely the PMO can be tied to organizational success, the better. However, in its early stages, the measurement may not be so lofty, and may be focused on getting more fundamental actions to happen, such as defining a training program, defining and promulgating project management standards, beginning the development of a common methodology, providing guidance in the use of newly introduced tools, and the like.
It stands to reason that the measurement of the PMO should evolve as the entity itself evolves over time, and in this manner a more direct linkage to organizational success can be measured at an appropriate time in the evolution of the PMO.
Practical Tips for Capturing CFO Mind-space
We've discussed the formation of the PMO as an implementation underpinning to a project management improvement program. Now, keep another key concept in mind when approaching the PMO value proposition: The PMO doesn't stand by itself. It's a component of a presumably larger strategy manifested as a series of investments for organizational performance improvement.
When selling the PMO to the CFO, the following three topics should be addressed:
1) What are the efficiency and quality measurements for projects executed with the support of a PMO (people, process and tools) vs. others? Is the overhead that the PMO adds to the portfolio of projects it supports less than the value it returns? For example, if the PMO adds less than X% of the total project management cost, but improves other metrics such as expediting delivery timing, increasing quality of deliverables and reducing rework during project execution, than this is a powerful business case.
2) Are resources across the organization (not just PMs) utilized in a coordinated way so as to decrease project durations and maximize resource utilization and overall organizational delivery?
By defining weighting factors for small, medium, and large projects, for example, the PMO can determine the capacity utilization of individual resources to ensure maximum utilization. Using the same approach, common resource forecasting methods can identify areas of organizational “balance” challenges, where there may be too many or too few resources in different areas. The PMO is often the only entity with the proper focus, breadth of view, and capability to perform this assessment properly. And the payback can be substantial.
3) Does the PMO add value in terms of providing an ongoing evolution of process and tools development in addition to retention and professional development of the PMs?
Although a bit more difficult to measure than the other metrics, this perspective is critical. Consider measuring the voluntary attrition of your PMs, with the level of training and support invested in them. PMOs often increase PM retention as a result of training, measurements and/or rewards, and establishment of a defined career path. Additionally, reduction of rework and associated project timeline delays are a great measurement of process controls and efficiency.
Here then are five tips for specifically positioning these perspectives to put the PMO in a light that really resonates with the CFO, adapted from our thinking on the general approach to selling your project.
- Clearly link the PMO setup project (and costs) to the performance improvement strategy of the organization. If the PMO is not linked to a well-defined and credible performance improvement initiative, its criticality and value are much harder to explain. Performance improvement targeted specifically at business results will make sense to the CFO, and a reasoned and incremental approach to implementing the improved mission of the PMO that is consistent with the current resource situation will demonstrate awareness of organizational reality.
- Know the competitive landscape. Other programs will compete for scarce resources. The project performance improvement program (and the PMO underpinning for success) has to stand out and be better than the competition. If you intend to be better, it really helps to know the competition, so a bit of research is called for. What else is happening in the area of performance improvement and organizational evolution? What is the strategy for moving forward? Are other programs regarded as more important?
- Know the relevance of the project to the audience. It's imperative that you know how the PMO and its part in performance improvement fits into the personal thinking and measurement scheme of the CFO, as well as into his or her mission as steward of the organizations financial health. Since all selection approaches allow for some wiggle room in the decision process, knowing the personal connections that may exist between your PMO and the CFO and peers may make a big difference.
- Keep the presentation short, simple, and to the point. In presenting your PMO request, consider “headlining” the effort. That is, making your case in a very few (try 10 or less!) words and include the “why,” the “why now,” and the value statement (Why is it worth the expense?).
- Have supporting data available, but do not flood the presentation with details. For example, be prepared to discuss specific benefits, both hard and soft, the financial and non-financial impacts, and the synergies with other projects and programs. In addition, be prepared to address the impact of NOT pursuing or delaying the PMO funding. The cost of delays, in particular, are fruitful ground for making a case, including the aforementioned synergies, legal mandates, competitive activity, and market place dynamics.
Re-selling the PMO
We have asserted that the PMO should be discussed in the context of a larger focus on project performance improvement, potentially a well-defined improvement program. One tenet for program success is a constant focus on benefits realization. Linking a PMO to the early projects needed to defined training curricula, establish methods and procedures, and similar startup functions can be fairly straightforward. However, as the performance improvement program evolves and progresses over time, two things can happen that can make “selling to the CFO” more difficult.
First, project performance should and presumably will improve over time, and the question will be raised, “Why do we still need the PMO?” The answer is generally straightforward when things, such as personnel turnover, mergers and acquisitions, and internal structural changes, are considered. PMs still need mentoring and coaching, the relevance of process and procedure need to be evaluated over time, and tools and their effectiveness need to be analyzed periodically. Thus the basic function of the PMO in supporting these kinds of activities needs to continue.
Second, and potentially trickier to handle, is the almost gravitational tendency for PMOs to get heavier over time. People both inside and outside the PMO see opportunities for adding functions, both from the early-approved list, as well as from hearing what other organizations may be doing that seem to hold promise for the organization or add PMO sophistication. Functions not yet implemented from the early-approved list should always be re-evaluated before being implemented, for relevance and priority. Similarly, new potential functions introduced to the PMO evolution plan need to be examined with care for their cost and/or benefit proposition, as well as for fit with the current culture.
As each step in the evolution of the PMO is considered, functions and associated costs need to be considered in the context of how much they support the specific benefits that the performance improvement and nurturing program are trying to achieve. Positive answers to this analysis, properly quantified in the context of the overall organizational performance goals and objectives, will allow you to position the PMO effectively to the CFO on an ongoing basis.
A Final Word: The PMO and Ownership
PMs can be assigned to a PMO. They can be tasked to manage specific projects and report through the PMO to management, putting the PMO directly in the chain of command. Or, they can be loaned-out to components of the organization that need their talent. This kind of assignment brings challenges of accountability and personnel utilization and budget justification.
The PMO can also own project execution budgets, thus putting it more specifically into the line management chain. This can amount to a significant power shift in the organization and comes with its own set of problems and challenges.
Opinions are divided on the “goodness” of assigning PMs to the PMO, let alone allocating project budgets. Keep in mind, however, that when approaching the CFO, particularly when first considering a PMO and its costs, that assignment of personnel beyond the core needed for PMO functions themselves, raises the visibility and significance of the prospective PMO budget. And, thus, the effort put into justification, measurement, and accountability for performance may be concomitantly higher than in those situations in which the personnel budget is established only for core functions.