The PMO’s Silver Bullet

 

As I’m sure anyone who’s ever launched, headed up, or even participated in a Program or Project Management Office knows, there are hundreds of things that can derail your efforts, and bring your PMO crashing down in ignominious defeat. Elements that are outside your organization, inside your organization but outside the PMO team itself, or even within the PMO represent existential threats that can spell ruination, and dealing with them, or even recognizing them in time to attempt a counter-strategy is extremely tricky. If only there were a proven technique, something that, on its face, utterly and graphically contradicts the majority of the anti-PMO narratives that are constantly popping up and needing to be refuted, then the typical PMO would at least have a fighting chance of establishing the value of its generated information streams.

Well, good news, my fellow PMO aficionados!

This technique exists, it’s extremely simple to implement, and it absolutely drives a goodly share of your opponents to a place where their ignorant, nefarious motives in opposing you can be easily laid bare. I’ve seen this technique rescue failing PMOs, and secure needed status for upstart ones. It is singularly effective, and in such a dramatic manner as to be analogous to the one weapon that can kill various monsters, such as werewolves or vampires, the Silver Bullet.

“Enough already!” I can hear Game Theory In Management nation yelling. “What’s the technique?”

Why, it’s a lowly histogram.

With the same ears with which I heard the “What’s the technique?” question I just heard a collective groan. How can a simple histogram overcome these anti-PMO monsters? I’m glad you asked.

You don’t actually need to use a histogram for this particular information stream, but I’ve found it the most easily understood by execs who are either (a) not very good at interpreting complex management information products, or else (b) have the attention span of a typical executive, which is about 10 seconds. If you don’t make your case inside of ten seconds, your odds of having your version of the story resound in the board room are quickly reduced to nil. So, make your case effective, and to do this often requires a hard-to-ignore graphic, like a histogram.

Our magic histogram will be divided into months along the X axis, and will have three bars per month:

• The target projects’ Budget at Completion (BAC)
• Its “bottoms-up” Estimate At Completion (EAC)
• …and its calculated Estimate At Completion[i].

Generally speaking, these three bars may very well track within 5% of each other for the majority of projects’ life spans. But, when they do vary, it’s invariably in such a way as to demonstrate the value of the PMO in blatantly unequivocal terms.

This is because the projects that turn into disasters will have the following characteristics:

• Their managers will never own up to the unfolding catastrophe, instead convincing themselves that they will be able to overcome the difficulties afflicting their project. Hence, the so-called “bottoms-up” EAC will be influenced downward to match the total budget.
• The way that asset managers (i.e., accountants) predict at-completion costs is by trying to derive a pattern from spending rates. This technique is comically ineffective. It also has the advantage of being propagated by one of the PMO’s most entrenched enemies, which I’ll return to here in a minute.
• Conversely, you can count on the troubled projects manifesting performance issues early on in their life-cycles; it follows, therefore, that the one performance indicator that recognizes this (bias-free) will be the first to raise the sorely-needed red flag.

The calculated EAC is a uniquely Earned Value-ish concept, and tends to be exclusively within the PMO’s domain. The Cost Performance Index (CPI) is the amount earned (BCWP) divided by the amount spent (ACWP). Divide this number into the budget at completion, and you have an EAC that’s accurate to within 10 points (once the project has cleared the 15% complete mark). In other words, this simple technique will notify upper management of pending project management train wrecks far sooner than any other method.

If the PMO’s got it, it needs to flaunt it.

By plotting this calculated number and showing it in a histogram that also shows the projects’ budget and “official” EAC, an unmistakable pattern emerges. The budget bar remains fairly steady (unless an approved Baseline Change Request is processed), and both or either of the “bottoms up” estimate or the accountants’ estimate will tend to mirror the total budget. It’s basic human nature for the former, and the utter lack of reliability of the technique for the latter.  But, for those projects that are headed for difficulty, the calculated EAC bar will jump higher than the other two bars, and will tend to stay noticeably above them for reporting cycle after reporting cycle. By the time the troubled project’s troubles are so obvious that they can’t be explained away any longer, the calculated EAC will have been not only flagging the overrun, but demonstrably quantifying it rather precisely. This is at the same time as all of the other “information” streams have been saying, essentially, “nothing’s wrong here – we’re doing fine!” The only time the bottoms-up or accountants’ version of the EAC even begins to report accurately is when the overrun can no longer be hidden, and by then it’s too late for executive action that maybe, just maybe could have averted the disaster, if only they had been notified earlier.

I’ve employed this technique on a few projects (!) that accurately predicted multi-million-dollar overruns, and the response was always the same. Early on the members of the failing project team would vehemently denounce the technique, claiming (absurdly) that their “bottoms-up” EAC must be considered authoritative. The upper-level managers would receive the histogram with alarm, but actually be mollified by the troubled projects’ managers into disbelieving the calculated EAC. After a few reporting cycles with the delta between the “bottoms-up” EAC and the calculated version remaining significant (or even growing), the PMs would employ some desperation tactic, like filing a get-well Baseline Change Proposal (BCP), or tapping project reserves, but the inevitable conclusion would become plain for all to see: the calculated EAC had the story right, all along, and everyone else had it wrong.

And now, for the piece de resistance…

If the first Silver Bullet didn’t kill the monster, try this one: it’s another histogram, except this time each month has a single bar, the calculated Variance at Completion (VAC) amount. Take all of the projects in the portfolio, and calculate their EACs. Subtract this figure from the total budget (BAC), and then sort them from lowest number to highest. The result is a chart that ranks the projects, in order, from most troubled/highest projected overrun to healthiest/highest underrun. For good measure, color the overrun bars bright red, and the underrun bars green. This report will drive the managers of the troubled projects bonkers, but it’s pure gold to your organization’s executives.

Did I say pure gold? No, rather, pure silver, as in Silver Bullet.

[i] Make sure the colors of the histogram’s bars have high contrast. I like to use gray for the total budget, orange for the bottoms-up EAC, and either bright green or blue for the calculated EAC.