BY LORRAINE S. MITCHELL, PMP
All currency is in U.S. dollars, unless otherwise stated.
How will you tangibly contribute to your company's bottom line, either by generating revenue or through cost containment?
When executives at IBM Corp., Minneapolis, Minn., USA, began considering the merits of a project management office (PMO), staff was faced with this question. Even after determining everything the company could gain from a PMO, project managers didn't have an answer.
At IBM, senior management often supported project processes, training, tools and methodologies, but these same leaders generally lost interest as their focus switched to other responsibilities and critical return on investment issues.
A project office generally isn't recognized for intangible benefits such as project management training, methodology and intellectual capital. Respect and appreciation come when the staff identifies profitable projects, contains costs by halting a failing project and contributes overall to the company's bottom line.
Unfortunately there is a lack of reliable quantitative data to prove that a PMO can actually improve a company's bottom line. The project office must cultivate leadership support by consistently delivering highly visible solutions—and implementing them. While senior management must grant authority to the project office staff, the project office must ensure that the organization is listening to and acting on its direction.
Ultimately, the IBM PMO was approved, but the PMO staff learned its lesson. Soon afterward, it set about achieving—and demonstrating—its tangible benefits.
The IBM PMO team spent a considerable amount of time creating and marketing a consistent message on the value of the project office. Staff prepared a brochure that detailed services and procedures, including when to engage the project office staff, project management tool and methodology training, and project management mentoring.
Team meetings and one-on-one get-togethers with departmental leaders allowed staff to discuss project office roles and responsibilities. During monthly feedback sessions, leaders and project team members could provide suggestions for improvement regarding project office deliverables. The most important lesson learned from these meetings? The PMO needed to consistently engage and motivate all members of the organization about its mission.
At American Express, Minneapolis, Minn., USA, project managers worked with the finance department to identify what projects would be the most profitable. They applied a standard process for up-front cost/benefit analysis of potential projects. A repeatable process produces a fairly reliable set of numbers that can be used to compare possible initiatives. This cost-benefit analysis (CBA) process shouldn't be time- or resource-prohibitive.
CBA tools in the marketplace range from extremely in-depth analyses to high-level evaluations. The most important criterion for deciding whether a project can be justified is net present value: the discounted monetized value of expected net payback, or benefits minus costs. Net present value can be the determining factor for a prioritized project list, ensuring that the most beneficial projects are the organization's top priorities.
However, that prioritized list also must align with the company's strategic goals. For instance, some infrastructure and Web application projects at American Express were rejected immediately as they did not comply with the technology standards created by the organization.
System-critical projects or service requests were not put through the rigor of a CBA, because service requests can be completed more quickly in some cases. By ensuring that an organization objectively evaluates a project's deliverables, a PMO can contain costs and generate revenue.
At American Express, the project leaders used a standard process and timeline for assessing major projects. The staff conducted regularly scheduled project assessments for important initiatives to assess leadership, teaming, schedule, cost and project quality. Non-quantitative information, such as leadership and teaming, may be gathered and analyzed through surveys and/or interviews.
When approaching executives on project management benefits, it pays to have a focused plan of attack—and to anticipate what executives want. IBM executive leadership gave project managers three months to outline a PMO structure and implementation plan. At that point, staff had to deliver a presentation to convince executives that a PMO would add value to the organization. To thoroughly prepare for the presentation, the PMO staff:
▪ Met with all project managers to survey their needs
▪ Invited a top project management consultant from IBM headquarters to share knowledge on the organizational and cultural challenges of implementing a PMO
▪ Reviewed several project management tools
▪ Used the Project Management Institute's A Guide to the Project Management Body of Knowledge (PMBOK® Guide) as a foundation for practices and project methodology.
As part of the successful presentation, the staff outlined the services that the PMO would provide, such as project administrative support, consulting and mentoring of project management expertise, developing standards and guidelines, creating a project management methodology and providing project management training.
The outcome? IBM executives approved the plan, and project staff have benefited from improved project management knowledge and quality management for all deliverables.
The team must feel positive about leadership or the individuals it's working with, so identifying areas for improvement helps maintain the project team's momentum. Quantitative data can be analyzed through status reports, issues logs, risk identification, budget and schedule data, and quality standards. PMO resources may find ways to shorten a schedule, decrease budget costs or mitigate risk.
The technical lead was the project's “forecaster,” or the person who had the ability to accurately predict what would happen if corrective action wasn't taken to ensure all tasks stayed on track.
For example, prior to the implementation of project assessments, the project leaders experienced what most large organizations sometimes do: project failure. On one project in particular, a $7 million, 18-month implementation of a new annuity administration project became a $13 million, 24-month effort that had to be halted before completion. The issues on this project included scope creep, poor vendor management and loss of team morale.
Ultimately, an in-house solution, titled the “LANmark” project, was developed and implemented on-time and under-budget, but the lesson was learned: Stop and assess the health of your project on a weekly and monthly basis.
The LANmark project had its issues from the beginning: It needed to utilize the same team that had been assigned to the failed project, it had a limited budget, it was under an extremely tight deadline and it required numerous external resources to meet that deadline.
However, the LANmark project had what the other project didn't: strong and knowledgeable leadership. The project manager set up weekly meetings with this leadership team to discuss project progress and the team's morale. All project team members were constantly encouraged to speak to anyone on the leadership team about their concerns or issues on the project. In some cases, key team project members had regularly scheduled meetings with one leader. These individuals now had an outlet, and they used it regularly. On the LANmark project's final lessons learned document, the team identified their ability to openly discuss issues as one of the positives of the project.
One of the most important contributors to the project, the technical lead, met weekly with the project manager to discuss what tasks were on schedule, what tasks were in jeopardy of not meeting the schedule and who on the team was or was not contributing. The technical lead was the project's “forecaster,” or the person who had the ability to accurately predict what would happen if corrective action wasn't taken to ensure all tasks stayed on track. This feedback was obviously invaluable as it gave leadership the opportunity to be proactive rather than reactive when dealing with project schedule and quality issues.
Two key project leaders met both weekly and monthly to scrutinize the project budget. This included the input and approval of each project team member's hours, detailing what invoices were paid and still outstanding, identifying and communicating any unplanned costs, and working with finance staff to correct ledger entries that did not belong to the project.
All of this information was shared with the project executive sponsors on a weekly basis. Their support of the project increased as they came to understand the honesty and timeliness of information they received regarding the project schedule, quality, financial data and team morale. PM
Lorraine S. Mitchell, PMP, is a senior project manager with Northwest Airlines Inc., St. Paul, Minn., USA. She has led a project office and has 15 years experience in IT project management, including software development and infrastructure implementations.
Reader Service Number 025
PM NETWORK | NOVEMBER 2002 | www.pmi.org
NOVEMBER 2002 | PM NETWORK