Why was the PMO manager promoted..?
From the PMO Setup T3 - Tips, Tools, and Techniques Blog
by Mark Price Perry
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Promotion (noun) / the advancement of rank or position in an organizational hierarchy. |
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Why was the PMO manager promoted..?
In the cartoon above, the chief executive officer informs the PMO manager of his decision to promote the PMO manager to the Vice President of Strategy and Corporate Development. In the context of this company, this is a tremendous promotion and a reflection of the PMO manager's value to the company. Of the many reasons why the PMO manager was an outstanding candidate for this open executive position, the PPM meeting held earlier in the day was yet another one of those reasons. And, the PPM meeting served to convince the chief executive officer that the PMO manager should be immediately promoted and also given a big pay raise, the corner office with a view of the perennially snow-capped mountains, a company car, membership to the golf and country club that the company belonged to, and most importantly, a personal assistant.
So what exactly happened at the PPM meeting..? Well, the leadership team was having their regular meeting to discuss and select new projects. All was going well. And toward the end of the meeting, two final projects were being considered for selection. Much of the evaluation criteria for the projects were exactly the same as shown below.
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Project |
Time |
Cost |
Benefit |
Time to Benefit |
Risk |
Strategic Alignment |
Customer Sat Impact |
Employee Sat Impact |
PPM Tool Scorecard |
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Project A |
6 months |
$500,000 |
$4,000,000 |
6 months |
Low |
High |
High |
Medium |
9.5 out of 10 |
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Project B |
6 months |
$500,000 |
$2,000,000 |
6 months |
Low |
High |
High |
Medium |
9.0 out of 10 |
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Both of these projects are outstanding projects to consider and they both ranked high on the PPM Tool Scorecard. Unfortunately, the company can only choose one of the two. Nine of the ten members of the PPM steering committee placed their votes for Project A, but one of the ten, the PMO manager, voted for Project B. After explaining his rationale, all other nine members changed their votes to Project B as well. Assuming all of the above PPM data is accurate, what possibly could the PMO manager have said to get all nine other members of the PPM steering committee to change their vote from Project A to Project B..?
If you have taken the time to read this post, I hope you will take just a little more time to offer up an answer and rationale why Project B might possibly be the better project of the two..!
(THE ANSWER TO THIS QUIZ IS ON PAGE 1 OF THIS BLOG - Posted by Mark Price Perry on Monday, December 19, 2011)
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Posted on: December 16, 2011 11:42 AM |
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Comments (13)
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Naomi Caietti
Senior Project Manager | ePMO | Higher Education | Healthcare & IT| Linkedin.com/In/NaomiCaietti
Mark:
Thanks for the case study challenge.
The PM Champion voted for Project B because of its dependency to be completed prior to Project A starting. Project A required integration into a database that was being built by Project B team of staff and developers. Although the cost for Project B was the same and the benefit was lower; Project A has a constraint just shared that impacts the portfolio. The vendor just informed the PM that the development team working on Project B would not be available for release until Project B was completed. Unfortunately, the resources allocated for development staff on Project A were the same resources allocated to Project B. The PM also informed them that the shared development effort by internal staff and their vendor will help with transfer of knowledge and may potentially lower the costs of Project A. The Leadership Team was pleased to change their vote.
Mark Price Perry
Business Driven PMO Evangelist| BOT International
Orlando, Fl, United States
Naomi, excellent insight, answer and rationale. Thanks so much. The dependency of one project to another would absolutely be a deciding factor. In this case, however, there is no such dependency. Both projects are completely independent of each other. The only data point that is different is the benefit amount. One would think that Project A would be the better project to select of the two. In fact, nine of the ten members of the PPM steering committee initially did. But the PMO manager offered up a reason why Project B was the better project for the organization. Thanks so much for your excellent insight. But in this particular scenario, there is a different rationale why Project B was the better project of the two..!
Naomi Caietti
Senior Project Manager | ePMO | Higher Education | Healthcare & IT| Linkedin.com/In/NaomiCaietti
Ok, had to be the first one out of the gate since I missed the last one.:) Hmm, okay so (hint) all data available is provided.
Next......
Another one of your trick questions..! Here goes. The benefit of the two projects is a revenue benefit, not an expense reduction benefit, and the organization is concerned over the possibility that they might far exceed their revenue plan. As a publicly traded firm with a revenue and earnings plan already forecasted and committed to the investment community, they are chosing Project B in order to "hold back" on revenue as stock price is driven more by consistent performance to plan than it is by exceeding plan one day and missing the next.
Mark Price Perry
Business Driven PMO Evangelist| BOT International
Orlando, Fl, United States
Anne, excellent answer and rationale..! The scenario you laid out (like Naomi''s scenario) would indeed give a reason to select Project B. However, the company has a cracker-jack CFO that is an expert in managing revenue recognition, so that is not a problem in this case. In your rationale you described the product of the project benefits as revenue benefits as opposed to expense reduction benefits. HINT, that is very close to the answer and the reason why the PMO manager advised that Project B was a better project for the organization than Project A. If we were playing "Marco Polo" you would be inches away from me..! Please try again..!
Mark Price Perry
Business Driven PMO Evangelist| BOT International
Orlando, Fl, United States
Naomi, yes, all data is provided. And all data is truthful. And no other data, not part of the analysis of the two projects (Project A and Project B) as shown in the table is a consideration. There are no hidden contingencies or surprises. Nor is there a reason to pass on a more deserving project in order to achieve some kind of business measurement. There is just a compelling reason why Project B was the better project for the organization, despite Project A having what seems to be twice the product of the project benefit. Loved your scenario and rational, very insightful. And thanks for playing..!
 | Anonymous |
How about tax liability from the revenue? Project A would have a much higher tax liability than Project B which could in fact net out the total benefit gain. (That is unless the company also has a "cracker jack" CPA!
We have had this very discussion regarding project benefits and I think I know the answer. Project A is a project for which the benefit amount from the product of the project is an increase in revenue. Project B is a project for which the benefit amount from the product of the project is a decrease in expense. The PMO manager in your scenario recognized that there is a difference between revenue dollars and expense dollars. For example, let's say that the company has a 10% gross profit margin. That would mean that it takes $10 of revenue to produce just $1 of profit. So a project that would produce a two million dollar expense reduction which goes directly to the bottom line profit would be the revenue equivalent of twenty million dollars. Hence, regarding Project A vs. Project B, a two million dollar expense reduction benefit (all other things being equal of course) would be a better project opportunity to pursue that a project that would increase revenue by four million dollars. Since there is a difference between revenue dollars and expense dollars, this needs to be taken into consideration. Just saying a project has a $4m benefit vs. a $2m benefit, without knowing the type of financial benefit, can lead to the selection of a less deserving project. Again, all things being equal. Am I close?
Mark Price Perry
Business Driven PMO Evangelist| BOT International
Orlando, Fl, United States
Scott, congratulations..! You answer and rationale is absolutely correct.
In this little scenario, the benefit amount of Project A is $4,000,000 and the benefit amount of Project B is $2,000,000 and with all other factors being the same, one could easily conclude that Project A was the more deserving project of the two. And, that conclusion could lead to a bad decision and missed opportunity. The reason..? There is a difference between revenue dollars and expense dollars. Naturally, every organization (public corporation, private company, government organization, etc.) will have a different financial structure, so it is important to understand that financial structure as a prerequisite to any decision making activity involving the evaluation and selection of new project opportunities. Also, in addition to the financial structure, there are strategic considerations such as the importance of attaining the various business measurements. For example, the opportunity to realize an increase in revenue might be viewed differently based upon whether or not the organization is in need of additional revenue. And the same could be said of an opportunity to realize a reduction in expense. Scott, congrats again on a great answer and rationale.
| Anonymous |
Aha.... Very interesting. At our company, we do not distinguish this difference. I wonder how many wrong decisions we and others have made on account of not considering type of benefit dollar, revenue or expense. You have given us something to think about......!
Hope to get the next exercise correct. Keep them coming. These are fun and insightful.
William Wiliams
Project Manager| W3src Consulting
Canyon, Tx, United States
Sorry I didn't get here sooner ;~) Nice one!
Harlan Bridges
Consultant, Coach, Trainer, Speaker, Program Manager, Project Manager| Entrepreneur
Seguin, Tx, United States
Well, I didn't make it in time to answer the question. But as a comment, I''d like to add that this demonstrates the complexities involved with projects and the affects they have on businesses. It serves to further illustrate that we must strive to understand the benefits of a project to the business. This benefits realization aspect of projects should have a more prominent role in project selection. I have seen too many project selection and prioritization processes miss the point. In addition, this also illustrates how important it is to not allow scorecards to overrule good sense in project selection. One further comment, I''d like to add, I believe we should be cognizant of the project mix and its role in project selection. Focusing solely on a single project can be misleading.
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