The Business Driven PMO

A quick Internet search yields lots of great information about the benefits of a Project Management Office (PMO): common processes, improved project selection and oversight, and best practices for everything under the sun that might be related to a PMO. There's also a lot of good guidance about what you need to do to get started. But before you run off to create your charter, your business case and the presentation materials, you may want to consider if your organization is actually ready for a PMO.

Organizational readiness is the combination of circumstances and conditions that enable the initial formation of the PMO and provide the necessary ongoing nutrients to achieve full potential.  In a nutshell, organization readiness means having the 'right stuff' to make sure that the PMO will be able to spend its time contributing to the organization's success rather than just fighting for survival.

Having started more than a few PMO's myself, I can tell you that the best condition for readiness is ‘need.’  All of us know that want is very different from need.  When everyone shrugs their shoulders and sighs, 'Yeah, we could probably improve our project performance,” or “Maybe starting a PMO might be helpful but...,” it’s highly likely that that the organization is not ready.  On the other hand, when projects become a burning platform – with that undeniable set of challenges that are appropriately addressed through the expert application of the disciplines or processes typically found in a PMO - then you're ready. 

For example, let's say you have a large program or initiative.  But it’s not just any large program, this is a large mission-critical program; A program that, if it fails, takes the company's future with it.  You need central coordination and visibility into multiple efforts so that swift and decisive action can be taken as challenges arise. Or, let's say that you work in an environment where there are a lot of projects going on concurrently and, while everyone is working hard, little gets done.  Priorities are unclear and competition for resources is fierce.  Management recognizes the problem but can't seem to get their arms around the situation.  In both cases there is a compelling need for what a PMO has to offer, and you're ready for a PMO.

Something else to think about is the breadth and level of organizational support. In my definition, organizational support means more than just lip-service. True support means that the PMO stakeholders recognize and can defend the value of the PMO.  It also means that those stakeholders across the impacted organization are willing to participate in the formation of the PMO, contribute to the design of PMO processes and standards, and support the application of and adherence to those standards over time. 

While we often recognize that this kind of support is important from our executives, we underestimate how important it is from peer groups within the organization. After all, these are groups that the PMO ultimately depends upon for the resources and information it needs to accomplish its mission.  If these groups aren’t ready and willing to play, there won't be much of a game. The PMO will be relegated to the role of ‘Process Police,’ spending more time chasing down data, documents and people than adding real value.  Or even worse, the PMO will be perceived as the ‘Prevention of Progress Department’ – additional overhead without any real benefit. 

Last but not least, organizational readiness for a PMO is tied to organizational will:  Once your organization has a PMO in place, are the decision-makers going to make the decisions needed to realize the benefits?  If a project is inadequately justified, poorly defined or badly managed, is someone going to be willing to say ‘Stop’?  If we provide information that clearly shows we have inadequate capacity to execute all of the projects that we want to do is someone going to make a decision about what we are not going to do?  The best PMO in the world can’t be successful if decision-makers can’t or won’t decide.

So are you ready for a PMO?  If you don’t have clear need, support and will, it’s highly likely that starting a PMO will be an uphill battle and, even if you can pull it off, success may be short-lived.  If you already have a PMO without need, support, and will, it may be time to make it a priority to get your organization ready for what it already has.  Been there.  Done that.  Good luck. 

The role of the PMO has become more critical than ever in supporting strategic business priorities. As PMOs become more successful, they also need to be more accountable and prove their value. In this blog post we outline our top 10 metrics to track PMO performance. Although a PMO may not be able to track all these metrics immediately, as a PMO grows and matures, it should be able to track the majority of these metrics on a quarterly performance scorecard.

We’ve organized the ten metrics to map to four business drivers of a PMO: (1) Strategic Alignment, (2) Operational Efficiency, (3) Execution and (4) Business Value Delivered.

Strategic Alignment

1. % of Projects Aligned with Strategic Objectives.The number of projects, or weighted cost of projects, that are aligned with at least one strategic objective over the total of projects.

2. Investment Class Targets ($). Set investment targets for Run, Grow, and Transform type of projects and analyze spend variance against these. A simpler alternative is to report the percent of effort/cost going toward ‘Keeping the Lights On’ (KLO) activities for IT.

3. Business Unit Investment Targets ($). Set investment targets for cost and effort devoted to each business unit and analyze spend variance against these.

Operational Efficiency

4. % Resource Utilization.The percentage of time spent on productive activities such as project work, ticket resolution, etc.

5. % Project Effort.For IT PMOs, the percentage of time spent working on projects, as opposed to maintenance, enhancements and tickets. This should be measured against a target to show delivery of new business/technology investments.

6. % Project Churn. The number of projects put on hold or cancelled over the total number of projects in a given period.

Execution

7.. % Increase in Project Success Rate (or % Decrease in Failure Rate).This assumes success is defined not just by time and budget,  but by delivering the business requirements (based on satisfaction surveys of the business stakeholders post-delivery).

8. Variance to Budget ($). Cost savings measured by positive variances to budget. This assumes project costs are accurately estimated during planning. Earned Value can also be used for this, for instance looking at the % of projects with a Cost Performance Index (CPI) over 1. CPI = Budgeted Cost of Work Performed (BCWP)/Actual Cost of Work Performed(ACWP).  BCWP is Earned Value (this is the PMI definition).  PMO will need to monitor CPI on a per project basis.

Business Value Delivered

9. Customer Satisfaction (%).A measure of stakeholder/customer satisfaction of business value delivered based on surveys post-delivery.

10.. Business Value Realized. Business value is realized when the right projects are selected and executed at the right time.  Selecting the right projects involves estimating Economic Value Add from a project.  This is best if based on actual benefits measurements post-project, but in reality the estimated benefits are simpler to calculate tied back to the project delivery date. This can be measured in cost savings, additional revenue, increased customer satisfaction etc. A standard scoring model can be used to normalize across different benefits, and business value points used to demonstrate value delivered.

In future blog posts, we’ll dig into some of these metrics in more detail. Are there metrics you use that you’d elevate to the top 10?

If this week is any indication, 2012 is shaping up to be the Year of the PMO.

A recent survey from project management firm PM Solutions found that PMOs are becoming more influential and entrenched than ever. The “State of the PMO 2012” survey reached out to more than 500 project managers across a number of industries and saw that, in general, PMOs are playing a significantly larger role in strategic functions, putting greater visibility (and greater pressures) on their success. PM Solutions noted that over the last 12 years the number of organizations with a PMO grew by 40 percent – from 47 percent in 2000 to 87 percent in 2012.

Ultimately, this survey reinforces what Daptiv is hearing from our customers – PMOs have become a trusted advisor in the enterprise and must lead the way to enable intelligent investments and cost optimization. They’re making good traction, according to the survey:

• 30% decrease in failed projects
• 25% of projects delivered under budget
• 22% improvement in productivity
• 19% of projects delivered ahead of schedule
• 31% increase in customer satisfaction
• 29% improvement in projects aligned with business objectives
• Cost savings of US$411K per project.

It’s increasingly important for PMO leaders to partner with and provide C-Level executives with the right project intake process to pick investments that will align with this strategic imperative.Indeed, the survey found that PMOs are moving up within many organizations – with 66 percent of PMOs surveyed reporting to an EVP or higher.

Last November, Daptiv forecast that in 2012, organizations would take a more holistic view of their business by using PPM tools to manage end-to-end service portfolios, product delivery, application lifecycle management, and change management programs. Again the PM Solutions survey found that those PMOs managing what were perceived as high-value tasks such as portfolio management were given increased responsibility and viewed as being significant contributors in spearheading significant new initiatives.

We’re only one quarter into 2012, but the stakes are clearly being raised for PMOs to continue delivering in terms of supporting both strategic business goals and the bottom line. The role of the PMO has become more critical than ever – how has your PMO evolved over the past year?

GUEST POST: Claire Schwartz

In the last couple of posts, we’ve written about the challenges of providing information for decision-making.  From collecting data to converting the data to information that tells a story, it’s all about making sure that we’re providing decision-makers, including ourselves, with what is necessary to make solid, fact-based decisions.  But there is one more variable we need to consider: what is the best way to communicate that information? 

The channels used for communicating, as well as the form and format in which the information is presented, influence both the decision-maker and the decision.  Besides concerning ourselves with the ‘what’ we need to consider the ‘how.’  How can we present the information in a way that assures timely receipt and accurate interpretation?

If you’re like me, you receive and send information for decision-making in lots of ways: emails, reports, presentations and meetings.  While each of these can be effective, in the aggregate we find ourselves bombarded with information from all directions.  While some of the information is useful and relevant, some is not.  Some is clear and well-presented while some is fuzzy and ambiguous.  Some clearly identifies what action is required and some is just ‘FYI.’  Figuring out what information is significant and what is just ‘noise’ is not only time-consuming; the noise can often drown out what is really important.

As with any problem, recognizing that there is a problem is the first step.  But if your job is about providing information how can you reduce the quantity, increase the quality and truly make information a tool for decision making? 

Think about one decision that you need to make on a regular basis.  Now close your eyes and imagine that the all the critical information you need to make that decision is in one place and, at a glance, you have what you need to understand the situation and make your decision.  In your mind’s eye you are probably envisioning a dashboard.  And you’re not alone.  It seems like everyone is asking for dashboards these days.   But just as throwing a bunch of ingredients in a pot does not always make a tasty dinner, jamming a bunch of information on a page does not necessarily make for a good dashboard.  

A dashboard is essentially a mechanism for providing a lot of information in a single place.  It contains the dials and indicators that provide information about what is happening and where decisions or actions are required to either get things on track or keep them on track.  Consider the dashboard in your car - it’s a single location where you can quickly get information about most everything you need to know to operate and control your car when you’re on the road.  Through the windshield you can see where you’re going and any obstacles or hazards in your way, the speedometer helps you control your speed, the odometer can tell you how far you’ve gone.  There are also a variety of indicators that light up to indicate when corrective action is needed like low oil pressure, or that your engine is overheating.  While there may be a lot of other things going on in and around the car, the instrumentation on the dashboard is designed to show you only those things that are important or ‘key indicators’ that are most critical to the operation of the car.  There are a lot of other things it could tell you, but it sticks to those things that count.   

In addition to showing you what’s most important, each of the dials and indicators has a corresponding set of decisions or actions associated with them.  If the speedometer indicates that you’re going too fast, you lighten up on the gas pedal.  If the oil pressure light comes on, you pull off the road and turn off the engine.  If the ‘check engine’ light comes on you check your bank balance and call your mechanic….

Just as a lot of thought goes into designing the dashboard in a car, there are important considerations that go into designing a dashboard report.  First and foremost, you need to remember that one size does not fit all.   A number of years ago I had an opportunity to ‘fly’ a commercial jet in a simulator.  The first thing that struck me as I sat in the pilot’s seat was the mass of instrumentation on the dashboard – nothing like the dashboard in my car.  Why? Because flying a plane is different than driving a car – a pilot makes different decisions than a driver hence different information is needed to inform those decisions.  Likewise, managing a corporation or a division is different than managing a project.  As long as the decisions are different, the dashboard needs to be different. 

Once you’ve identified the audience for your dashboard you need to understand both the decisions that are being made and what key indicators would suggest that action is required.  If you are designing a dashboard for a group of executives managing a project portfolio, keep in mind that managing a portfolio is about managing a set of investments. The decision-makers need to know what those investments are, how they are performing and make decisions about reallocating or reprioritizing those investments to meet the organization’s goals for realizing return on those investments.  In this case your dashboard may include things like the performance of different categories or types of investments (projects), how much money is being spent in different categories of investments, and what return you are getting from the investments already made.  If you’re designing a dashboard for the members of the project team, your dashboard is going to be more focused on the tactical items that help the team member prioritize and focus their work -  what is overdue, what needs to get done today or this week, reminders about upcoming events or milestones. 

Your target audience can also tell you a lot about the best way to present the information.  Typically we like to use graphs and colors in dashboards because one picture, colored dot, or downward facing arrow can convey a lot of information in a small space.  But as nifty as graphics and colors are, they may not be informational to the user.  For example, in the team member’s dashboard a graph showing the number of their overdue tasks by week since the beginning of the project is not as useful as a short list of the overdue tasks for this week.  

You also want to be mindful of how you use the space on the page.  The best dashboards are easy to read and use the white space on the page to clearly separate the information so that any given indicator can be located and read quickly.  You also shouldn’t need a magnifying glass to read a list or the labels on a graph – just because the software you use to generate your chart allows you to set the font size on your labels to 2 point tiny-type, doesn’t mean that you should use it.

Last but not least, don’t forget that for many decision-makers more detail may be needed to make a well informed decision.  Here the dashboard provides the launching off point, but the underlying detail needs to be as readily available as the dashboard.  I’m very partial to dashboards and reports that provide the ability to ‘drill through’ into more detailed information.  For example, if I’m managing a portfolio of projects and one of my investment categories within that portfolio is not performing well, I might want to drill through to see which projects are contributing to the problem and why.  What was important on the dashboard was recognizing that action is needed, but the detail needed to decide what that action is going to be is also readily available.  It’s really like that ‘check engine’ light in your car – if it goes on you know you need to do something, but what that something is may require further action.  On the flip side, if the light stays off you can just ignore it. 

Dashboards are a great way to help reduce the ‘noise’ and help individuals focus on the information that really matters most.   If you’re designing and building dashboards, you’ll probably need to go through a few iterations with your stakeholders but the results are well worth the effort.  Just remember – NO TINY-TYPE! 

This is part two in a three-part series discussing the importance of portfolio planning. This series provides insights on portfolio management best practices in process, metrics and reporting.

When organizations set a budget they typically go through a process to essentially build lists of things that they need or would like to get accomplished during the budget cycle, assign a cost to that activity, and go through some prioritizing to get to the total assigned number. Whether you know or not, if this sounds like a process you have then you are executing a non-structured portfolio activity.

This old-school process has been successful for decades, but with today’s pace of business and the impact of macro-environmental change, organizations need to build processes that are more responsive to that change.

Recognizing this, organizations are beginning to evolve and adopt portfolio concepts. However, these efforts tend to lag, mostly due to a focus on improving the prioritization process and fall into some classic pitfalls: 

• “We’re overworked.” A tendency to focus on capacity first. Although I argue that capacity is one of the constraints in portfolio management, initiating planning exclusively to focus on managing capacity is froth with errors. Organizations focused exclusively on workload have a tendency manage resources at a micro level and that just isn’t sustainable. I once had a client that when he moved his focus from matching capacity to demand and focused on the right things, the dialog changed and he became more connected to the business. Dialog between the organizations ensued that actually increased the quality of business outcomes. 
• “Emotional.” I call this prioritization without principles. Without a framework to evaluate an investment, it always ends up that the individual who screams the loudest, has the best presentation (sales skills), or was the last one in with the bosses won. 
• “We’ve already spent the money.” It’s OK to hold or cancel and investment when change happens - It just makes good business sense. When an organization doesn’t hold or cancel a project, when it’s not the “right thing” and the investment resources are tied up in the wrong projects, that’s a lost opportunity. 
• “We don’t revisit the evaluation criteria.”This is the one that really frustrates me. Just because it worked three years ago doesn’t mean the criteria is still valid. In reality this criteria not only reflects current business climate, it also represents the decisions we made in the past. Good governance always validates the criteria before anything in the portfolio. 
• Lack of Investment Selection Cycles. Once a year (budget time) really is no longer valid. An organization needs to match their investment selection cycles with the velocity of their executing projects. In other words, if the majority of your projects are short term, then more frequent cycles are required. If, however, the majority of your projects are multi-year then a minimum of four times a year should be sufficient to just validate the investment outcomes are still desirable. 
• No Formal Investment Governance. Governance provides transparency. We now know (during the recent economic crisis) without proper transparency, investment chaos ensues. 
• Everything in the Same Bucket. If we only work on the highest priority projects, then quality/value of lesser priority assets will erode to a point of being a liability to the organization. Having a well thought out diversified project portfolio insures that organization remains healthy.

Non-structured portfolio activity is unavoidable, but knowing what to expect and understanding the potential pitfalls related to portfolio planning will help you plan for and address them in advance, keeping your portfolios on track—and  saving valuable time and resources.

In Part III of Portfolio Planning, I will demonstrate the portfolio lifecycle and the key characteristics of the framework.