The Business Driven PMO

In our day-to-day project management and PMO activities, the easiest and the most important thing to miss is plan for ahead what happens AFTER we cross the finish line. So technically speaking, once project managers hand over the reins of the completed project to the business owner, their job is just half done. For a project to be considered complete, project managers must focus on the other half, which is “Benefits Realization”.

Benefit realization is the confirmation that the value a project was expected to generate really does get delivered.  In our everyday project management lives it is easy to get buried in details around task management, risk mitigation, resource capacity, balancing budgets and all the other moving parts.  We often forget why we set out to do the project in the first place:  the delivery of a product or service, an enhancement or improvement, or a capability.  For example to meet some new regulation, standard or market demand.  But what if, after we deliver the goods, and did exactly what the customer asked for, we realize that all the effort and resources we used to deliver the project don’t amount to what they were supposed to?  That’s exactly what benefits realization is all about.

We’ve all heard of ROI – return on investment.  It is the concept of an investment of some combination of resources (people, money, equipment, etc.) yielding a benefit to the investor.  A high ROI means the investment gains compare favorably to investment cost. As a performance measure, it is one of the best methods to evaluate the efficiency of an investment.  ROI does not exclusively have to be in financial terms.  It can easily be an operational advantage, an improvement in position, or other positive change.  In order to compare the efficiency of a number of different investments we need to compare like measures, which is why a financial ROI is one of the most commonly used.  Unfortunately, without benefits realization, our ROI is simply a guess.  And that is why benefits realization is so important.

I’ve discussed with   many of our clients about this and have found out that there is a need for a wide degree of maturity around the realization process.  This is an indication that while the concept of realization is gaining interest, it is still far from a mature practice.  Which presents a great opportunity for those organizations that are not doing it – now is a great time to implement this practice.

How to launch a benefits realization initiative?

One of the best approaches involves setting goals, tracking against those goals and including a ‘hand-off’ step, similar to the passing of the baton in an Olympic relay race.  Tactical steps you can take include:

• Set your sights:  using whatever calculation available, combined with experience and validated by results from similar projects, come up with a target for what the value you think the project will deliver.  Set that as the initial estimate.  Enlist the help of a financial leader or controller to help set the original estimates.
• Continual monitoring:  Using the initial estimates or targets as a first guess, continue to refine the success factors throughout the lifecycle of the project.  These are often called forecasts or committed values and are more accurate than the original estimates.  It is best to continue revising these figures throughout the lifecycle of the project.  The objective here is to have these forecasted numbers eventually match the actuals.
• Start tracking actuals now:  some project can actually generate benefits even before the project is complete.  What a great win for the project team to be able to report these.
• Put a plan in place: Add a milestone or stage beyond the Complete step called Close or ‘Realization’ and set a validation step 3, 6 or 12 months after the project is complete.  It sets the expectation that the work is not over at Complete.
• It is outside of the project manager’s responsibility:  As the project comes closer to its Complete or End date, engage the financial sponsor and the process owner (the person who is benefiting or owning the project’s or product’s outcome, improvement or change) and have them start validating and “owning” the numbers.
• Go back to the beginning:  how accurate were your original estimates compared with your forecasts and your actuals?  Take those learning and apply them to future estimates.  This is called continual improvement – applying lessons learned and best practices to improve the entire PMO.

One last point is that it isn’t always about the money.  Sometimes projects generate other value, such as an improvement in customer satisfaction, or increase market share by launching a game changing product.  It is important to be able to quantify the value of these types of projects even if they do not generate direct revenue or cost improvements.  Many organizations call these ‘Level 2” or “Indirect Benefits”.

Finally, is a project complete without benefits realization?  To the project manager who’s already run their marathon and marked the project as complete, I expect their answer to be ‘yes’, but common sense tells us otherwise.  As a best practice, one of the most important factors in a projects success isn’t “how we did it” – coming in under schedule or under budget – but “what we did” – that the project delivered what it set out to do.

Expanding beyond team/social collaboration to business collaboration

The term “collaboration” has become one of the primary hot topics for businesses and analysts throughout the industry lately.  At its most basic level, “collaboration” simply means “working with others in a coordinated fashion toward a common goal.”  But few actually attempt to define what it really means in the context of business and PPM.

If you ask most people what capabilities define collaboration in the workplace, they generally talk about the sharing of information within a given team:  document management, threaded discussions, activity feeds, instant messaging, shared calendars, task assignments, facilitation of problem solving and idea development, communication of decisions and meeting minutes, etc.  This is all good, and certainly helps a team move forward in coordinated fashion toward the common goal of completing a project or specific unit of work.  Nearly all PPM solutions provide functionality to address each of these needs within the scope of a project.  SaaS PPM solutions are particularly well-suited to providing this level of team collaboration since, by their very nature, they are accessible to all team members regardless of geographic diversity and the information they contain is always available in near real-time.

I would argue, however, that this limited view of collaboration is incomplete.  Looked at from a broader perspective, an entire organization can be viewed as a collection of units which must all work together in a coordinated fashion toward the common goal of alignment and execution against the business’ corporate vision and strategic objectives.  Thus, business-level collaboration is necessary to establish the direction for an entire organization.  “Business Direction” includes the definition for the organization’s Vision, Goals and Strategies.  By sharing and collaborating on the Business Direction, the business teams will be better prepared to drive the various work efforts.  True business-level collaboration therefore depends on the free flow of information between the project teams and the outside world – management, other departments, executives, stakeholders, etc. – to facilitate proper alignment and effective decision-making throughout the entire organization.  It is this level of “business collaboration”, as opposed to individual “team collaboration”, which is often missing from a company’s collaboration strategy.  All too often, anyone not on the core project team is actually excluded from access to the system of record for project performance and must therefore depend upon periodic status updates or word-of-mouth communications to understand, participate, or make critical business decisions on project information.

Business collaboration provides a level of transparency and visibility to project details throughout an organization.  At its heart, business collaboration makes heavy use of enhanced dashboarding and powerful reporting capabilities to expose appropriate project information to those who are outside the core project team.  Ideally, facilitation of business collaboration also provides processes and methods for these external resources to submit inquiries and participate in discussions, access project documentation, and all of the other traditional collaboration capabilities as well.

When examining the collaboration strategy within your organization, be sure to keep the big picture in mind.  Team-level collaboration is certainly important.  But enabling collaboration across departments and across levels within a larger organization can often be even more critical to the success of the entire business.

When I was running the IT-PMO at PeopleSoft we faced an interesting dilemma. As we finished work on the integration of JD Edwards there was a ton of unmet demand for IT work from all corners of the enterprise. This ranged from tweaks to the purchasing system to an all-new global training environment. We quickly realized even our ability to analyze the demand would be swamped by the incoming flood of work.

So, we devised a scoring system. Why? There were three main reasons, all of which really comprise some fundamental principles when creating a scoring model.

First was the need to analyze and separate the wheat from the chaff quickly. Our primary driver was to be able to make an initial cut from 120+ requests to something more manageable for more in-depth analysis. So we needed a way to make quick judgment calls to find the top 20-30 project requests with the most merit.

We further realized that any analysis that came up with a specific number (like $300K for changing the purchasing program), even with a caveat of +/- 100%, would become sticky. That is to say, if the $300K estimate was later revised to $400K - well within the +/- 100-% - the executives would still want to hold us to the $300K! "I thought you said $300K 2 months ago - what changed!" was a familiar refrain. Scoring models, on the other hand, place estimates in ranges. So as long as you don't exceed the top range it’s all good.

Many project-driven organizations today face this same dilemma on an ongoing basis. Scoring models meet this challenge well. So, to create a scoring model that will quickly find the projects with the most merit without being nailed down to estimates too early, keep these key principles in mind:

1. Group your scoring criteria into around three buckets - these will be used as axis on a bubble chart later. My favorites are benefits, cost/size, and risk. Others include impact, and for product development groups may include market share, technical feasibility, and margin.
2.  Scoring criteria should comprise ranges.  An example would be a 1-5 rating of potential revenue increase, with 0 = none, 1 = less than $1 million, 2= 1-5 million, 3 = 5-10 million, etc. Same goes for project cost or other financial metric. For criteria like risk, an example would be a rating on project familiarity with 1 = very familiar with this type of project and 5 = never done this kind of work before. Make sure all the criteria produce the same range of scores (e.g. 0 - 5) so you can create weighted averages for each group and a weighted average total project score.
3.  Scoring criteria should fit the company's strategic direction and business needs. A retailer will be concerned about increasing market share, while a SaaS company like Daptiv is concerned with customer satisfaction.
4.  Bubble charts are a great tool for graphically envisioning which projects will produce the most bang for the buck. While the simplicity of a single chart is more efficient, I have seen new product development organizations with up to 6 criteria groupings used on 2-3 bubble charts.
5.  Back test the model. Take the scoring model produced and score the current slate of active projects. When I did this with a major retailer a couple of years ago, we knew we had it right when the only current projects that wouldn't have made the cut turned out to be problem children that should never have been launched.
6.  Always analyze requests in cycles. Applying a scoring model to each request as it comes in negates the comparative process. It also leads to new priorities interrupting live projects, which results in project and resource churn. We typically recommend quarterly cycles. Monthly can work in an environment with larger quantities of shorter lifespan projects. Generally annual cycles are too long as too much work comes up in the interim. However, an annual planning process for the larger, more strategic work can be coupled with a quarterly cycle for the smaller work.
7.  Scoring models work best when there is a cross-functional team empowered with the ability to make decisions. This means they will be high enough level in the company to not be second-guessed by colleagues or superiors.

Once requests are reviewed and sorted using a scoring model, decisions can be made about which should proceed for further analysis. Those that pass muster then pass into the more traditional initiation process for projects, ensuring that valuable analysis time is not wasted while allowing the focus necessary to properly present the best projects for funding.

Early this week we announced the launch of our upcoming PMO Success Webinars for 2012, aimed at offering real-world guidance on how to build and run a successful Project Management Office.  This free educational series will provide insights and perspectives from PMO Directors and Consultants at organizations running successful PMOs as well as Daptiv’s professional services team.

According to research performed by industry analysts such as Project Management Institute (PMI), the Gartner Group, and Forrester Research, 25% of all PMOs closed within one year and 50% closed within two years. Clearly, PMOs face significant challenges within their organizations. On the other hand, the need to successfully complete projects has never been greater.  Most companies recognize that projects are a major vehicle by which companies grow, improve and meet their business objectives.  The need to plan, monitor, and execute projects has never been greater. Companies decide to setup PMOs to do just that but they often fail to get the desired results from them.  Daptiv’s PMO Success Webinar Series will shed light on how companies can prevent the fall of PMOs and instead turn them into a strategic asset.

We kick off our first webinar titled, “Are You Ready for a PMO” on Tuesday, September 25. It will focus on how organizations can assess the need for a PMO and how they should go about setting one up. Come join the discussion with 250 industry professionals who have already signed up for the series. Panelists will include Mark Perry of BOT International and Dave Blumhorst of Daptiv Solutions, LLC.

To find out about more the Daptiv PMO Success Webinar Success Series, click here.

People and organizations all over the world continue to embrace and adopt “Lean Management Principles” in their work. What started with Edward Deming in the 1950s and later found its way into the Toyota Production System has now made inroads into software development. You will notice that IT organizations and software development teams often talk about “Lean” software development or “Kanban” as it pertains to how they work. It is therefore essential that today’s Project Management Office (PMO) understand this old new way of project execution in order to stay relevant in today’s business climate.

Before we go any further, let us first understand what Lean is all about and whether PMOs should embrace this concept as well. Lean in a nutshell, is a set of tools that help in the identification and elimination of waste. As waste is eliminated, quality improves, consequently, reducing time and cost of production. While elimination of waste can seem to be a simple subject, it is often easier said than done. Organizations often have a difficulty classifying a process or activity as waste and often tend to be conservative when identifying/defining waste. Toyota defines Lean as the reduction of three types of waste:

1. Non-value-adding work
2. Overburden
3. Inconsistency/Unevenness as it pertains to flow of work

Lean aims to make the work simple enough to understand, execute and manage, and I believe that all PMOs should strive for this. Let us now get down to brass stacks and examine how a PMO could strive to be Lean. Here are some steps a PMO could take:

1. Prioritize projects based on business value. A project is a vehicle for change in an organization, which means that the business does not like the current state it is in and constantly evolves to move to a new state. Be willing to question the assumptions that drive any decision to change and make sure that the scope of the project is in line with the desired
   change/objective. This will help PMOs avoid/eliminate non-value-adding work.
2. Keep the internal PMO processes simple to start with and make changes as you mature. This will help the Project Managers and the PMO director to focus on delivering business outcomes rather than following mundane procedures.
3. Level out the workload among the Project Managers so that they can provide each project the required attention. Take the help of automation tools such as Project Portfolio Management software to help with collaboration, resource management, project prioritization, and reporting.
4. Use a “pull” system as your project intake process. In such a system, the sponsor of the project would place an initial project request. This request in-turn would trigger a project prioritization request, which in turn triggers subsequent
   requests (such as resource request). This will encourage a “just-in-time” process and will discourage a “just-in-case” process (common in a “push” system) wherein resources are often under-utilized.

To conclude, as projects and project executions take on a lean posture, it is imperative that PMOs do so as well. With this blog I have just scratched the surface of the lean PMO concept. Stay tuned for more! In the meantime, I welcome your comments and feedback.