The Business Driven PMO

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.

The Educause annual conference is the nation’s largest gathering for higher education IT professionals and Daptiv was present for the well attended 2012 conference in Denver.  Issues that attendees were concerned about were diverse but several interesting themes emerged over the course of attending sessions and having one-on-one conversations with end users and CIOs.  One particularly well attended discussion on Project Management was intriguing, many pain points seemed common across education IT departments and Project Management Offices. Here are some of our takeaways from the conference:

Increasing Demand Placed on IT: Demands placed on IT departments are becoming large and disparate with multiple university departments demanding conflicting projects from an increasingly resource strained IT staff.  With this increased pressure, CIOs and managers are looking for a way to streamline and manage their suite of projects.

Prioritization: Many attendees were seeking best practices and methodologies for prioritizing their portfolio of projects.  Several attendees shared their successes and failures but several threads were common though all successful processes:  easy to communicate and simple to deploy.  Many attendees sought visualizations and reporting that would allow them to quickly judge the size of a project vs. its projected benefit.  The easier it is to demonstrate relative importance and prioritize one project over another, the easier it is to communicate with and receive buy in from competing university departments.

Communication: Ensuring everyone is in the loop on project decisions is critical.  Lacking a single source of truth for project management, implementing an effective communication plan can be difficult.  Project Managers and IT needs to communicate early and often with stakeholders.  Schools and universities which emphasized their success in communication reiterated this point.  Every stakeholder needs to feel that they are part of the dialogue.

Flexibility vs. Standards: Project Management Offices, once built to solve the above issues often face their own hurdles.  Being flexible enough to maintain engagement with stakeholders while ensuring accountability with standards is itself a challenge.  Flexibility needs to be built into the DNA of the PMO and IT Department early and must be matched in any tool used to manage their projects.  It should be up to the department to develop the processes, not have an outside process thrust upon them.  In the words of one attendee, “The tool used should be process agnostic”.

This year the Daptiv team attended Gartner Symposium/ITxpo 2012 in Orlando for the world’s biggest industry conference focused on IT leaders with over 8,000 senior IT executives (including 2,000 CIOs). Here are some of our takeaways from the Gartner sessions at the event:

(1) Nexus of Forces: Gartner predicted the need for senior IT and business executives to re-imagine business as the result of a powerful nexus of forces — mobile, social, cloud and information. This Nexus of Forces reflects how people want to interact with each other and their information and will make many existing IT architectures, organizational structures and IT strategies obsolete. Gartner forecast that there would be 5 billion mobile devices by 2015 and an 18% annual growth of cloud-based solutions leading up to 2016.

(2) Four Styles of Strategic EPMOs: Donna Fitzgerald from Gartner gave a presentation discussing the four styles of EPMOs: (i) Strategic EPMOs, (ii) Business Transformation Offices, (iii) Reporting PMOs and (iv) Operational PMOs. The styles of PMOs reflect whether the PMO’s business context is business transformation or steady-state, and whether they or facilitating or controlling the resources in an organization. Donna predicted that in the next 24 months 60% of the Fortune 1000 will establish one of the 4 styles of an EMPO driven by financial accountability and continued issues with project coordination across silos.

(3) Gamification: Gartner predicted by 2015, 40% of Global 1000 organizations will use gamification as the primary mechanism to transform business operations. Gamifiication is the use of game mechanics in non-entertainment environments to motivate a change in participant behavior. Tactics include progress bars, rewards for effort, feedback and multiple long-term and short-term aims. Elise Olding gave an example of a digital media company that implemented a gamified project management tool with rewards for entering accurate status of projects in flight.

(5) PPM Tools – A New Magic Quadrant for Cloud-Based PPM Services: Dan Stang discussed the new Magic Quadrant for Cloud-Based PPM Services in the ITxpo theatre. The underlying infrastructure of these services is cloud computing — scalable IT-enabled capabilities are delivered as a service to external customers using Internet technologies. Dan outlined some of the benefits of cloud-based PPM services, including less time-to-value, less financial commitment and risk and the ability to rapidly configure, adopt and consume PPM capabilities. You can view the full Gartner MQ document here.

As you can see in the photo, our booth was front and center in the PPM show floor area. We met almost 200 PPM practitioners at the booth and had great conversations with attendees from all over the world. Our next Gartner event is Symposium/ITxpo in the Gold Coast, Australia 12^th-15^thNovember.

PMOs and project managers are faced with failing projects more often than they would like to and it often turns out to be a demoralizing experience for all stakeholders. Consequently, it is vital for PMOs to recognize the signs of a failing project and take corrective action before it is too late. In order to engineer a successful turnaround, PMOs and PMs need to watch for certain leading indicators of project failure.

Leading indicators of project failure

• Progressive scope creep:  While some scope changes may be necessary, constant updates to the project scope indicates that the project sponsor and other stakeholders don’t have their business case buttoned up or the assumptions under which the project was sanctioned are no longer valid.
• High rate of churn in project staff:  It is normal to have long projects to have planned rotation of staff.  However, you need to watch for unplanned attrition from the project team.  Each person who leaves in an unplanned way takes with him/her knowledge of the project.  Areas of the project can be put at risk and the team may need to revisit some past decisions because no one knows why the decision was made.  All this results in extra time and cost with no increase in value.
• High cash burn rate: Are you tracking your Cost Performance Index (CPI)?  CPI = Earned Value/Actual Cost.  If your CPI is trending less than 1, then you are not using your budget efficiently and are burning through cash.

Reversing the trend (Turning around a failing project)

• Revisit the scope statement periodically (say once a month) and verify if you are still delivering the same project.  If the nature of the scope change is so drastic that it will potentially change the deliverable, take it up with the project sponsor and decide if the project should be stopped in its current state.
• Review the staffing situation every month.  Evaluate how many unplanned vs. planned exits have occurred.  If a critical resource or a member of the project leadership team has left, it is a red flag.  Summon a meeting with all stakeholders and the project sponsor to assess the situation and plan to bring in an alternate equally capable resource who is committed to delivering on the project.
• If your CPI is trending less than one month over month, you are putting the project in a financially unsustainable situation.  You should jump into cost control mode and only approve critical expenses.  If you are buying from an outside vendor, use your purchasing team to negotiate a lowest possible price or do this yourself.

Walking away from a failing project

Pulling the plug on a project that is underway is often not an easy thing to do.  There usually are a lot of personal and political forces at play.   More often than not, people will waste money (and time) in order to justify costs they’ve already spent.  The key here is to maintain objectivity and avoid the Sunk Cost Fallacy.  Meet with your project sponsor and review the costs-benefits of the project and be prepared to justify why the project should be cancelled or stopped.

This is a question that has been posed many times and answered many times. Yet, we continue to see PMOs failing very often. Does it mean that the answers that have been presented are incorrect? Not necessarily. In fact, most answers surrounding metrics and value are relevant but don’t address the question of “fit”. The metrics that make sense for one business may not make sense for another.

At the end of the day it is about demonstrating value to the business as a whole. A successful PMO is a PMO that is focused on business value and helps the C-suite succeed in its strategic objectives. Daptiv’s four-part PMO Success Webinar series explores this in more detail. The goal of the webinar series is to provide real-world insights on how PMOs can become strategic assets to the business.