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Four Steps to Building a Successful PMO
By Lisa Sipe, PMP – Global Knowledge Chief Information Officer

The failure rate of large Information Technology projects is legend. Survey results illustrate that about 50 percent of all projects do not meet original budget or schedule estimates and are missing critical scope elements, while an additional 25 percent are abandoned, never reaching completion at all. Yet according to Gartner, world-class organizations enjoy an IT project success rate closer to 90 percent. What is it they know about delivering business value through project management that nearly triples their success rate? Most of them have established successful project management offices (PMOs). In fact, two-thirds of organizations implementing PMOs report that project success rates have improved significantly as a result.

Implementing a PMO is a project in itself, subject to the same pitfalls. However, you can improve the success rate of your PMO implementation by following four clearly defined steps.

Step One: Establish a vision.

In order to know whether or not your efforts are successful, you must be able to articulate what will be different about your organization after you’ve launched the PMO. Perhaps your customer service satisfaction rate will increase by 35 percent, or you will gain a competitive advantage by completing projects on schedule instead of several months late. Too many times, we skip directly to questions of what and how. What processes do we need to implement? How will we convince business unit project managers to use shared tools and techniques? Resist the temptation. Don’t even think about what and how until you’ve asked yourself why at least five times.

PMOs can guide portfolio investments, improve project execution, focus on value capture, or all of the above. Determine whether your organization’s failures stem from confusion over the right thing to do or inability to do things right.

If, at the completion of a major project, the business units display an obvious lack of enthusiasm, it could be a symptom of your failure to align the project with your organization’s strategic business plans. A difference of opinion about whether or not a project was successful could indicate poor business case discipline or a failure to properly charter the project; schedule overruns could be attributed either to poor project execution or unmanaged contention for resources within a portfolio of projects. So, keep asking and answering the questions of why your organization believes it needs a PMO until you get to the “aha”. The answer to all the subsequent what and how questions should be rooted in the answers to why.

Step two: Consider the culture.

The most successful PMOs reflect the culture of the larger organization in their role and placement. Small organizations, comfortable with informal collaboration and free from the complexities of communicating to and managing the roles of large, dispersed staffs, may achieve measurable improvements by establishing a Project Management Center of Excellence. Consultative PMOs can help train project managers, facilitate the sharing of best practices, provide tool libraries and even encourage more experienced project managers to provide informal coaching. But, a consultative PMO draws the line at actually staffing projects and reporting on project health.

This approach is a low-cost, low-risk way to introduce the PMO concept to an enterprise, leaves the greatest power with individual business units and is unlikely to trigger the same resistance that a highly centralized PMO might. The tradeoff is that it will likely deliver less dramatic results than a more powerful PMO. And, finding a sponsor willing to make even this small investment might prove challenging. Early wins demonstrating the value of voluntary compliance to the business units and their project managers are crucial to the success and continued existence of the PMO.

In organizations with a different culture, the best approach may be to establish Centralized Enterprise Project Management Offices. PMOs of this nature typically suit larger, more mature organizations that want the PMO to have greater power to enforce standards across projects and are willing to accept the greater risk this hands-on model carries in exchange for the promise of more dramatic results.

The dark side of centralized PMOs is that they can be perceived as “Big Brother”, bureaucratic and rigid beyond benefit, existing for the sole purpose of maintaining their own power.

If this is the model you choose, expect to spend more time and energy to gain buy-in than you might have originally planned. Stakeholders throughout the enterprise should be able to repeat back with sincere belief the business case for establishing the PMO. To reduce issues of authority and ownership, establish a process for continuously communicating the role and functions of the PMO, as well as the metrics that will be used to measure its success.

After you’ve considered the fit of these two models within the culture of your organization, revisit your answers to why. Can you clearly see how the model you selected and the role you defined for your PMO will drive the improvements you seek?

Step three: Measure what matters.

The expense involved in establishing and maintaining a PMO is small compared to the typical value of the project portfolio. Still, demonstrating that the organization derives value from the office is essential to its acceptance and continued improvement. In addition to the obligatory metrics regarding the on time, on budget health of individual projects, consider a mix of metrics that support the three areas of PMO influence: doing things right, doing the right things, and capturing value.

If you’re launching a consultative PMO, you might want to highlight the on time, on budget performance of projects that are using a standard, best practice methodology in contrast to those that are using non-standard approaches. Dividing projects into categories meaningful to your business strategy and evaluating how you’ve allocated your projects assets across investment types can quickly demonstrate whether or not resources are being spent on the right projects. And, developing a “percentage of business case value captured” metric-supported by standard business case templates and reported by the project sponsor post-implementation-clearly demonstrates whether the financial benefits accrued.

Don’t succumb to urge to present any metric of possible interest to anyone. The most significant metrics can seldom be captured in a completely automated fashion. So, focus on the critical few that speak directly to your audience in ways that matter to them. After all, isn’t that the reason you spent so much time clarifying why?

Step four: Take the long view.

Project funding, staffing levels, and even PMOs will come and go with changing business environments. Your goal is to embed the principles of project management and value capture into the organization. Favoring long term change over “flavor of the day” management techniques will ensure a lasting legacy. But, real change takes time.

A CIO/PMI study showed that project success rates doubled in the second year of a PMO’s existence and continued to climb for several more years. So, use the answer to why you established a PMO to help you target the improvements with the greatest leverage across critical measures of project performance. Then, set reasonable expectations about the rate of change and magnitude of improvement.
Make sure you account for the impact your chosen PMO structure will have on the rate of change. A scorecard demonstrating the target value for critical metrics across multiple quarters can be a good communication tool.

Declaring Victory

These four simple steps will put you on the path to improving project success rates and creating more business value from IT project investments. As with all projects, communicate constantly with stakeholders to address concerns and clear obstacles to implementation. Pay careful attention to limiting project scope to only that required to deliver the changes you envisioned. And, declare small victories early on to maintain the momentum.

This article was originally published in Global Knowledge’s Business Brief e-newsletter. Global Knowledge delivers comprehensive hands-on project management, business process, and professional skills training. Visit our online Knowledge Center at www.globalknowledge.com/business for free white papers, webinars, and more.

© Copyright 2008, Global Knowledge. All rights reserved.

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