Project Management Institute

Strong signals

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Establishing a project management office could economize and synergize an organization's many varied projects and lay the groundwork for more cohesive, consistent and mature business practices.

by William Hoffman

Jeff Sierra first considered implementing a project management office (PMO) a dozen years ago when he was vice president of operations planning at Budco. The Highland Park, Mich., USA-based outsourced distribution and communications company regularly managed and executed projects for itself and its customers, and Mr. Sierra explored a PMO as a way to take the growing business to the next level.

He decided against a PMO at the time for a variety of reasons. The perceived authority level of project managers was not as high as it should have been. Budco was satisfied with the decentralized management of projects among division leaders and wasn't looking for a central authority for the cross-functional discipline.

Today, circumstances have evolved. Budco has grown to almost 1,000 employees. Deployment of companywide systems in the early 1990s unified operations, bringing departments and their managers closer together.

As Budco executives set new growth objectives and decided restructuring the sales force would be key to reaching them, Mr. Sierra and others decided to give the idea another look. Budco launched its first PMO, led by Mr. Sierra and John Gregory, the company's new PMO director, in early 2005.

➔Mr. Sierra's experience illustrates a critical point. “You need to have the desire for structure and synergy across multiple projects,” says Lonnie Pacelli, author of The Project Management Advisor (Prentice Hall, 2005) and formerly a director at Microsoft and Andersen Consulting. “Without that, you'll never get the pooling of resources to be more effective at what you do.”

Project managers have more and better resources than ever for establishing a PMO. The Project Management Institute released its Organizational Project Management Maturity Model (OPM3®) in December 2003 and recently announced its second edition update (see sidebar, “Second Term”). Hundreds of software applications are available to assist in the effort to create a PMO. The proliferation of PMOs makes it easier to find peers with whom one can compare notes, yet too many project managers make basic mistakes that can hamper, slow, stall or even derail PMO organizing efforts.

img THE PMO ALLOWS THE PROPER
DECISION-MAKING THAT SUPPORTS
CORE BUSINESS GOALS.
Mike Iaccarino, BusinessEdge Solutions, East Brunswick, N.J., USA

executive summary

➔ While a project management office (PMO) can help organizations reach the next level, executives and the culture must be willing and ready to accept the change.

➔ A PMO can oversee multi-phase, multi-departmental integrated projects by managing dependencies and changes across the enterprise.

➔ PMO leaders must be high enough within the organizational structure to have executives’ ears and authoritatively direct teams.

➔ Once implemented, a PMO can institute best practices, helping the organization reach the next level of maturity.

 

➔The PMO‘s centralized management is supposed to overcome pitfalls of multi-phase, often multi-departmental integrated projects by identifying and managing dependencies between projects to evaluate the impact of changes across the enterprise, says Mike laccarino of BusinessEdge Solutions, an East Brunswick, N.J., USA-based consulting firm that counts Merck, Merrill Lynch and UBS among its PMO clients. “The PMO allows the proper decision-making that supports core business goals,” he says.

The first thing a prospective PMO needs is justification, according to Mr. Pacelli. “If the first thing you say is, ‘We need a PMO,’ without organically starting to get there, you'll get resistance from people who don't want to give up their turf,” he says. “When I was at Microsoft managing their procurement portfolio, I had many projects but I never called it a PMO. I just said I was the program manager for this group of products, because as soon as I gave it a title, I looked like I was setting up a little bureaucracy.”

Laying the foundation for a PMO can start with a luncheon speaker, presentation to executives or a training course, says Eric Spanitz, president of Chicago, Ill., USA-based management consulting firm Synergest Inc. and instructor in project management in Lake Forest Graduate School of Management's MBA program. However, a timely project management success that delivers demonstrable (and preferably repeatable) operational or revenue improvements will promote general awareness of the benefits better than any presentation. “I have seen organizations set up a PMO first, only for it to be seen as a policing arm, or even additional red-tape or overhead with no real value,” he says.

Focusing the efforts of the PMO can prevent mission sprawl, a common problem in new cross-functional organizational initiatives. “One key realization of this engagement has been that a clear vision and direction is essential for the success of the PMO,” says Sudhir Mundkur, vice president for IT at the Housing Development Finance Corp. (HDFC), Mumbai, India. Juggling a portfolio of 200 projects, the IT department's structure was scattered among retail, wholesale and existing applications.

An enterprisewide PMO was launched to address key stakeholders’ concerns about a lack of regular and effective status updates, ineffective interdepartmental coordination and lack of project clarity. The new office soon established communications channels to stakeholders and standardized project monitoring and reporting; it enabled project managers to concentrate on efforts beneficial to HDFC and its customers.

Business Case

Budco started with an advantage that too often has to be built in: a business rationale. “We felt by creating a more centralized PMO we'd be better positioned to support sales teams and other groups” to reach senior management's new growth targets, Mr. Sierra says. Annually, Budco was managing 30 to 50 major projects—and hundreds of smaller ones, often for clients—with its decentralized model.

Mr. Sierra and others argued integration of project management efforts in Budco's IT, call center and operations departments could reduce costs and produce synergies that would advance the company's financial goals. Budco's private owner endorsed the idea, thereby helping minimize management squabbles over resource allocation and other issues in the transition to a central PMO authority.

➔Many organizations are not so fortunate. Because many modern projects ultimately are technological in application and execution, Mr. Pacelli says, their advocates tend to be IT managers or staffers who don't speak the bottom-line language of the boardroom. “If you present it in business terms and say, ‘We need to pool resources to reduce overall project spending by X dollars, because we're now leveraging resources and deploying them better,’ those are things any executive understands,” Mr. Pacelli says. “Don't explain it as the virtues of a PMO. Talk dollars and cents.”

second term

When the Project Management Institute released the original version of its Organizational Project Management Maturity Model (OPM3) in December 2003, the Institute thought it might sell 250 copies in the first six months. Three weeks later, the shelves were bare, and to date, about 3,000 copies have been sold to businesses and other organizations

Now, a team of more than 520 vot-unteers ted by Tom Keuten, PMP, is working on an updated and revised second edition, according to Lisa Jacobsen, PMI standards project spe-ciatist in Newtown Square, Pa., USA. Technical corrections will be made, unclear graphics will be redesigned and alternative distribution media are being considered. Also being considered are additional categorizations of Best Practices, changes to the OPM3 self-assessment and other content additions and alterations suggested by project managers' feedback.

OPM3 is a way for an organization to understand the Capabilities that aggregate to each Best Practice, to achieve a higher state of maturity in their organizations,” Ms. Jacobsen says. In a 2004 seminar in the subject, PMI Hong Kong chapter vice president Kevin Chui said that OPM3 aims to become a reference model for organizations as A Guide to the Project Management Body of Knowledge (PMBOK® Guide) has been for projects.

Currently, PMI is in the design process for OPM3's benchmarking capability and for a networked version of OPM3, Ms. Jacobsen says. She is compiling OPM3 case studies based on purchasers' experiences but doesn't expect to release them until 2006.

That calls for a special type of manager. Tom Westcott, CEO of Project Solutions Group, Marlborough, Mass., USA, teaches strategic project management at the University of Wisconsin Madison Executive Education Center, School of Business in its masters certificate program for project management and advanced project management. “One of the worst mistakes organizations make is putting a project manager in charge of creating a PMO and then treating it like a project,” he says.

Mr. Pacelli warns, “You don't want to have an executive who is a babysitter of the PMO. The executive needs to feel the benefit of having a PMO in the first place. You can't develop such a passion for the work you're doing in the PMO that you lose focus on the business reasons why you're doing it.”

At this stage, an important, sometimes unanticipated benefit of the PMO emerges: The office begins to serve as a unifying and standardizing conduit for enterprisewide best practices.

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Supporting Roles

Brazilian telecommunications giant Embratel employed a creative strategy to keep project management in line with boardroom expectations. After Brazil deregulated its long distance phone markets in 1999, Embratel launched a series of new products and services to keep itself competitive.

While executives agreed on their new course, there was much confusion among developers, engineers and IT middle managers. So in addition to its new executive-level PMO, the company set up a managers’ PMO below it to examine project management issues at a more detailed level, minimizing executive escalations.

The managers’ PMO evolved into a support structure for the executive PMO, the former often serving as subject matter experts for the latter. The managers’ PMO prioritized 30 projects related to the phone carrier's capacity and pushed the first 12 of those projects to market just six weeks later.

Budco's new PMO takes a similar approach. Mr. Sierra and Mr. Gregory, a 19-year veteran of the company's IT department and the PMO director, expressed confidence in the arrangement, which combines senior executive access with their mutual long-time, nuts-and-bolts Budco experience.

Fishing Lessons

➔Half of all world-class companies manage IT projects through a formal, permanent PMO, according to the 12th edition of Hackett's Book of Numbers (2004), a financial performance and best practices analysis issued annually by The Hackett Group, Atlanta, Ga., USA. These top companies also are 30 percent better than less proficient competitors at delivering major projects on time, on budget and to specification.

It's too early to judge Budco's overall results, though Mr. Gregory and Mr. Sierra say they're already seeing benefits. The sales team that was a prime focus of Budco's PMO responded positively after some initial hesitation. “We needed to let them know what the value was,” Mr. Gregory says. “We tried going out on sales calls, working with them on proposals, rather than imposing upon them.” Once the sales force understood, they became enthusiastic internal proselytizers for the PMO.

The project management orientation also helps other Budco departments, from IT to call centers, warehousing and distribution and digital printing, Mr. Gregory says. “When they engage customers, they're thinking more of the overall needs of Budco,” he says. “They're not forgetting what everyone else needs.”

At this stage, an important, sometimes unanticipated benefit of the PMO emerges: The office begins to serve as a unifying and standardizing conduit for enterprisewide best practices. Knowledge becomes institutionalized and available across the organization. Top-down efforts to enforce consistent, repeatable processes, practices and policies take hold among middle managers, who can see real results. The PMO helps its organization mature.

Mr. Pacelli advises rotating younger project managers into and out of the PMO on a regular schedule. What the PMO risks in institutional memory and experience, it can make up for in the allies it buys as young managers disperse into the organization. “It's teaching a man to fish, instead of just fishing for him,” he says. PM

William Hoffman is a freelance writer based near Washington, D.C., USA.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK | AUGUST 2005 | WWW.PMI.ORG

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