The Business Driven PMO

News sources everywhere are streaming reports on the state of today’s economy. There is plenty of speculation, conversation and hyperbolae on the need to invigorate the economy with investment. Businesses and government organizations are being pressured to spend more to create jobs and boost the economy. 

But the fundamental question to ask is “At what risk?”

I get this question all the time. Project investments are being made continually. Maybe not at the pace we would like to see, but it’s happening and the state of project execution remains high within organizations.

A colleague of mine and I were recently discussing whether there is a void or opportunity to introduce new thinking in addressing the "at what risk?" question. Let's examine.

First, let's examine the statement itself.  What does “At what risk?” really mean? We can look at it in multiple dimensions. 

Project execution is a common place where we look at risk and risk management, where risk is anything that could potentially adversely affect the schedule, cost, quality or scope of a project. Basically, how does risk impact your project objectives? PMBOK outlines many processes and techniques for managing risk such as the ‘Probability and Impact Matrix for Qualitative Risk Analysis’ and quantitative risk analysis techniques such as ‘Sensitivity Analysis and Decision Tree Analysis’.

Another perspective to view risk and risk management is from the finance angle. We can look at how cost benefit analysis (CBA) can present a financial perspective of risk and we get that from ROI, NPV, etc. But these dimensions are only at the perspective of the project and the projection of potential value. 

There are other dimensions of risk we can discuss, but those have specific vertical applications, like the risk of entering a market or the risk of applying a particular technology.  

These all are very valid methods and processes, but can we answer our earlier question "At what risk?"?  I think so and we can simply address this by asking a simple question: "Are we working on the right things?"

Drawing on portfolio management techniques helps identify "At what risk." But, you may say that risk is already defined as a dimension of portfolio management, and you would be right. Organizations have struggled with implementing portfolio risk models and maintaining them.  

I prefer something simpler. Can I answer our question early in the project lifecycle without spending a lot of energy? Yes. Simply put: alignment , through the identification of what is important at the portfolio level and defining the alignment dimension of your portfolio solves our problem.  Why would we ever want to spend any energy at all on a project proposal if it doesn’t fit within the performance objectives and investment goals of the portfolio?   

From my perspective, answering the “At what risk” question can be a simple top-down exercise that can deliver great value to the organization. But the first question we should always answer is, “Does it fit?”  Then we can focus on evaluating and managing risk in the financial and project execution domains. 

Recently, the Harvard Business Review conducted a surveyof nearly 1,500 IT projects, inspecting the preliminary budgets, actual costs, and the final results of each initiative. After reviewing these projects, the authors found an astonishing average cost overrun of 27 percent (with each project running about $167 million). Perhaps more shocking, one in six projects went over budget by an astounding 200 percent, and ran past their initial schedules by an average of 70 percent. If these projects are not viewed as delivering tangible benefits to the business, they can cost an IT executive their job, and the company can suffer a significant loss of reputation or revenue.

Ambitious IT projects require PPM tools and processes that provide visibility and enable collaboration in real-time to avoid or eliminate massive cost overruns and schedule delays like those in the survey. To remain relevant, PMOs must prove their worth through integrated planning, consistent metrics for performance, flexible and adaptable methodology frameworks, and accountability for results.

Recently during our global user conference, Adapt 2011, Daptiv met with more than 150 attendees from 8 countries. The theme of the conference was “Realizing Business Value through PPM” and a major focus for attendees was how PMOs adapt to the “New Normal” of business uncertainty in their companies and the broader economy. A few key lessons from successful PMOs emerged that are worth sharing:

1.) Where the PMO reports to is important for how it is perceived in the organization. According to recent Forrester research, PMOs that report to the CEO or CFO are much more likely to be perceived as delivering significant value. If your PMO reports to the VP of IS/IT then keeping a strategic focus is key to being perceived as delivering business value.

2.) Communities of practice are important to gain influence in an organization. Listening to individuals in your organization, frequent meetings, sharing knowledge and mentorship, and proving support (not mandates) will lead to a PMO being viewed as a valuable and influential partner in the organization.

3.) There is a growing trend for successful PMOs in IT to expand to an EPMO, covering business investments as well as IT strategy and planning. A Daptiv customer who has successfully made this transition and presented at the conference was Mercy, a health care system with over 25 hospitals and 200 clinic locations, which incubated their PMO in the IT organization before creating a very successful Enterprise Project Office in 2007.

Yes, IT delays happen, even with the best of intentions. More often than not, they can be avoided through careful planning, communication and collaboration. IT governance and PPM tools have come a long way over the past several years and increasingly the PMO is playing a more strategic role within the organization beyond IT. 

Let us know whether you agree with these takeaways and what other trends you are seeing in your business as we move into 2012.

The PMI Global Congress offers a great opportunity to interact with practitioners of project portfolio management (PPM).  This year’s event was held in Dallas, Texas from Oct 22 – Oct 25.  My time was mostly spent in group interactions and attending presentations.  It provided a rich and diverse perspective on what people were experiencing in the project management space.

 If I were to distill my group discussions based on key challenges people are facing, they would include:

1. Resource management challenges– Many project management systems being used by PMs do not provide enterprise-wide visibility into resource availability
2. Implementation challenges– Companies are too often not able to get their current PPM system to work the way they want it to.  In most discussions, I heard the phrase “organizational impasse” over and over.
3. Challenges with enterprise level visibility– PMOs are spending a lot of time generating reports to use in executive meetings and are looking for a system that provides a single source of truth for reporting

The PMI sessions as always are rich in content.  The question is what is relevant to your area of interest.  I mostly attended sessions that talked about new project management trends.  Here are my key takeaways:

1. Agile project management is here to stay and it continues to grow in popularity.  However, organizations are struggling to reconcile agile and waterfall projects.  Nancy Nee from ESI International’s presentation titled “Agile: Still the Magic Bullet or Do You Need a Blended Solution” explained this problem articulately and offered a clear path that would help Agile and Waterfall projects co-exist and complement each other.
2. In order for PMs to be successful, they have to move beyond commonly understood project management activities and take on business analysis functions.  Today’s PMs should be able to assess, quantify, and communicate a project’s impact in business terms èthe PM needs to have a clear grasp of Earned Value, Project Finance, Business Case Analysis, and Balanced Scorecard concepts.  The presentation on Powerful Project Financials by Sean Wilson and Claire Schwartz, provided practical insights on how this can be achieved.  Roberto Toledo’s presentation titled “From Balanced Scored to Project Portfolio” showed how strategic initiatives can be achieved through execution of projects.
3. The majority (about 52%) of PMOs are not perceived as being successful.  In order to survive they need to re-evaluate their purpose and value to the organization they serve.  Jack Duggal’s presentation on “Reinventing the PMO” highlighted this problem in great depth and talked about PMOs evolving into an adaptive and ambient organization.  Duggal proposed an integrated PMO framework that focused on the following categories:
4. Execution and performance,
5. Strategic decision support,
6. Governance, and
7. Performance management & reporting

All in all, it was a great event for practitioners of project and project portfolio management.  There was something for everyone and I for one came away with nuggets of information that would be very useful to me as a PPM professional.

 -Satish

Guest Post: Ian Knox, VP Marketing, Daptiv

I attended Gartner Symposium/ITxpo 2011 in Orlando last week for the world’s biggest industry conference focused on IT leaders with over 7,500 senior IT executives (including 2,000 CIOs). Here are some of my takeaways from the Gartner sessions at the event:

(1) CEOs continue to worry about business uncertainty. The four major risk areas of (1) government direction, (2) commodity prices, (3) financial stability, and (4) popular confidence are causing continued business uncertainty. Although many business leaders are publicly stating a bullish ‘Plan A’, they are privately considering a scaled back ‘Plan B’ if some of the risks materialize.

(2) IT budgets will be flat for 2012. Similar to the last 2 years, Gartner is predicting flat (<2% growth) in IT budgets for 2012. However, flat IT budgets do not mean that IT is perceived as not delivering strategic business value. In a recent survey, 52% of CEOs see IT providing innovation or growth opportunities for the business vs. the typical cost reduction, efficiency and effectiveness benefits. Other areas of the business are seeing budget cuts, so flat or slightly growing IT budgets should be viewed positively.

(3) IT needs to focus on creating measurable financial benefits for the enterprise. Gartner states that by 2016 that 50% of CIO new project spending should be directed towards measurably improving enterprise financial conditions. This reinforces the importance of PMO leaders to help drive this shift by providing CIOs with the right project intake process to pick investments that will align with this strategic imperative.

(3) SaaS PPM tools provide more “Bang for your Buck”.  In the Project and Portfolio Management Applications MarketScope presentation, Gartner highlighted that SaaS PPM tools are driving down cost of ownership and presenting more risk-averse options for customers. One of the criteria for MarketScope evaluation was the overall PPM risks of tools, including price, complexity, start-up, and adoption. It was great to see Daptiv was given the highest MarketScope rating this year of ‘Strong Positive’.

(4) Social business software is primarily focused on marketing and customer service functions.  Although there is a lot of hype about the new ‘social enterprise’, Gartner’s recent Social Media Survey found that ‘strengthening customer relationships’, ‘enhancing brand awareness’ and ‘creating interactive customer relationships’ were the main drivers for social software in the enterprise. Although this will likely change to include project management in the future, increasing ‘employee productivity’ and ‘decrease business costs’ were not yet a hot focus area for social business software.

(5) Discussion of “Project” and “Project Portfolio” gives way to “Program”, “Product”, “Application” and “Service”. Given the broadened use of PPM tools for managing businesses beyond projects, more organizations are now taking a 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.

Ian

For a long time we’ve recognized that strong executive support is a key success factor for any project.  The project sponsor role was identified to address that need and now project managers make sure that someone’s name is always in the project sponsor space provided on all of our project documentation. 

But have we really taken the time to make sure that the person we identify as the project sponsor is the right person to fill the role?  Has anyone told them they are the sponsor? Or has anybody bothered to let the project sponsor know what being a sponsor really means and what we need them to do?  If the answer to any of these questions is anything other than a loud, resounding “Yes!” then we may as well leave the space on the form blank.  

Herein lays the difference between defining a project sponsor and truly having a project sponsor – the first looks good on paper, the second produces results.

So here’s my open letter to all those sponsors out there…

Dear Sponsor,

I know that you want this project to be a success and that you expect me as the project manager to dedicate myself to that goal.  I’m more than willing to do that, but here’s what I’ll need from you:

1.  Take ownership. If you are really the sponsor you’re supposed to have a strong, vested interest in the success of the project and you need to actively advocate for it. Don’t passively wait for stakeholders to throw up barriers to the project – you need to go out and SELL. I need you to directly address objections and be involved in the sometimes touchy negotiations and horse-trading that is needed to clear the path for the project team.
2. Be part of the project team. Actively engage in defining the objectives and desired outcomes of the project and help to continuously clarify, remind, and refocus everyone on what those are.  When there are conflicting objectives or when difficult issues arise, work with me and the team to evaluate alternatives, make tradeoffs and negotiate with difficult stakeholders to be absolutely certain that there is no question about what we are doing and why. 
3. Be available and accessible. I understand that you are busy but periodically I need your undivided attention. I need to update you on our accomplishments and challenges, let you know if we need help on issues, make you aware of risks, and bring items to you for decisions. My job is to use your time wisely and keep you informed, but lack of access to you makes that all the harder and more time consuming for both of us. 
4. Keep me informed. I realize that things will happen that I may not know about – or that you can’t tell me.  But if something comes up that’s going to impact the project, like reprioritization or a budget cut or even cancellation, the sooner I know the better. I promise I’ll do the same.

Sincerely,

The Project Manager