Does Your PMO... Blow?

Situation: You are interested in PMO performance issues.

At the end of 2008, ESI International conducted a study of 387 Program Managers, inquiring about the maturity and success of their PMOs. Only 8% of those surveyed described their PMOs as being successful.
 
Among the study’s findings:
Of the 92 percent who do not believe their PMO is successful, the main reason was a lack of:

• Executive support (34%)
• Defined roles and responsibilities (20%)
• Dedicated facilities, equipment and infrastructure (20%)
• Corporate goal alignment (12%) 

Eighty-three percent responded that their PMO was somewhat effective in addressing the key business challenges of their organization. Only 17 percent said it was very effective.

Thirty percent of the respondents said the existence of their PMO has been seriously questioned in recent years. Among the attributable reasons are:

• The PMO is seen as an extension of administrative support, rather than a professional body with value-add skills.
• Budget cuts necessitating cost justification, a difficulty for the non-revenue producing PMO.
• PMO size and organisational set up that are counter to time constraints under which project and programme managers operate.
• Lack of understanding of the business benefits of the PMO.
• The four main factors respondents identified that establish whether a PMO is mature are:
• Adoption of processes and goals.
• Support from management.
• Experience of PMO managers and members.
• Perceived value and benefit of the PMO within the organisation.

We spoke again with J. LeRoy Ward, PMP, PgMP, and EVP of ESI International about the survey.  “PMO executives are keenly aware of the obstacles to their success,” said Ward. “Closing gaps in skills, knowledge and tools are critical for enabling PMOs to meet these challenges and enhance organisational project performance.”  We then asked him a few more questiosn to get down to specifics.
 

Q.  How does the survey define success?  It seems as if large numbers of these PMOs achieved some measure of success, but perhaps didn’t meet the higher standard set here.

The survey did not set out to “define success”, but to identify barriers to it.  Success is something that needs to be defined by each organization and should be determined based on the strategic goals and objectives set out by the executive, executives, or governance committee who supported the founding of the PMO.  We have found in our more than 26 years of helping organizations improve their project management performance that success most commonly includes:  cost control/savings; improving time-to-market; a decrease in troubled projects; increase in client satisfaction (internal or external); and increased revenue and profit.  Other measures of success are more internal to the practice of project management to include better teaming, improved documentation and consistent application of best-in-class methodologies.

In the survey, we did ask respondents how they defined success from a very high level/broad perspective.  They said:
•    25% -- client satisfaction
•    22% -- project success
•    22% -- consistent methodology deployed
•    8% -- number of people trained
•    7% -- higher ROI

Clearly, these measures reflect the varying roles that PMOs can play within an organization.  One of the qualitative survey respondents, a senior PM from a UK-based retail operation, put it this way, “The PMO has to justify its existence and provide quantifiable benefits for its existence.” My one comment on these numbers is that I was surprised that only 7% defined success as proving a higher ROI.  In fact, this should be right up there with client satisfaction.  While deploying a methodology is an important function from a project manager’s point of view, it is largely lost in the most important issues facing business owners, the very owners who pay for projects.


 
Q.  One of your study’s findings was that “The PMO is seen as an extension of administrative support, rather than a professional body with value-add skills.”   Was that sort of comment restricted to those that are very governance-oriented (rather than support-oriented)?  What are the best ways to demonstrate (and perhaps document) value-add skills in these environments so they aren’t questioned later?

Based on the way the survey was conducted, it is difficult to draw a conclusion as to whether or not the role of governance would affect the perception of the PMO as more administrative rather than a professional body with value-added skills.  That said, a proper governance structure includes the involvement of senior leadership and provides a direct communications channel that should enable the PMO to consistently demonstrate its value as a professional body with value-added skills.  In other words, my 33+ years of professional experience leads me to conclude that the opposite is true.  If PMO has a well constructed governance structure, it is more likely to be perceived as a value-add function.

The “best” way to demonstrate value-added benefits for PMOs varies by organization.  However, framing that conversation in a way that focuses on improved project and business outcomes with an emphasis on financial benefits should speak effectively to executive management.  From a financial perspective, this can include, but is certainly not limited to: cost containment due to improved project success; increased revenues driven through smart project selection; or reduced labor expenses brought about by improved project management efficiencies.  The greater the degree a PMO can work with executive management in identifying, selecting and aligning projects to an organization’s strategy, the more likely executive management will view the PMO as an integral player in setting such strategy, thus increasing the value of the PMO to the organization. To be sure, the ability to successfully execute those projects to realize the intended benefits is where the “rubber meets the road” and where reputations are earned or destroyed.   From an executive’s point of view, the ability to beat a competitor to market, to satisfy existing clients, to expand geographically, or to expand a product line to a new demographic, and to demonstrate that project management was the vehicle which helped them accomplish that, will strengthen the role of the PMO and cause it to be seen as integral to business success.



Q.  Another situation that arose when people questioned PMO value was “Budget cuts necessitating cost justification, a difficulty for the non-revenue producing PMO. “  What are the best ways for a PMO to demonstrate and document ROI? (the more specific the better)

Let’s take the case of a PMO in a global drug development organization. Studies by the pharma industry have shown that it takes, on average, 11 years and USD802 million to produce a drug that one’s doctor can prescribe.  Needless to say, that’s a long time and a lot of money (no matter what currency you’re using!).  As a PMO director in this organization, I would first select a random sample of drug development projects that the organization has completed within the past 5-10 years.  We would then be able to average the length of time and money it costs us to produce our drugs; then we could compare that to the global average mentioned above.  We would then initiate a number of improvements through the PMO to the Global Drug Organization to help boost performance.  For example, we might institute or change the way projects are selected (portfolio management); we might establish criteria to be used in each phase of the drug development life cycle such that, if certain metrics were not met, the project would be terminated.  We might change the way we form teams for these projects option for the Integrated Product Development Team approach, in which a core team is assembled at the outset who plans the entire project from start to finish having as its representatives members from each functional group within the company who will work on the effort (e.g., research, toxicology, clinical, legal, marketing, IT, etc.)  We may also embrace the “heavy weight” project manager concept on certain strategic projects a concept used in the pharma and global auto industries.  Finally, we may provide relevant, targeted training to each project manager to ensure they have the requisite skills and tools to do the job.  Based on these and other improvements, we would then begin to gather project metrics that will enable us to benchmark these forward projects against our own experience, as well as the global data.  To the extent we have shortened our time frame, reduced our costs, and produced “blockbuster” drugs, which is defined as any drug that earns more than USD1 billion/year, we can draw a correlation between our improvement efforts and our project management initiatives.  The key issues most organizations have in demonstrating ROI is that they fail to establish this critical baseline.  Project managers can often work with the same intensity as the fervently  religious in that their “belief” in project management, far outweighs any evidence they can bring forth to prove their case.  Belief, faith and hope work well in religious circles; rarely do these emotions ever convince a group of executives regarding the value of project management.

[Editorial note:  Electronic copies of the report are available upon request.  Contact J. Scott Punk, APR]