I am currently in the process of establishing key performance metrics for project management, a project management value survey and maturity scorecard for our PMO. My challenge is determining a formula for calculating (in hard $) the value being realized by the organization and associated projects through the use of project management. We are primarily a projectized organization and are fortunate to be relatively mature in our PM practices. I have looked at the ROI/Maturity Model Study developed by Ibbs & Kwak but have been unable to extract the results I'm looking for or find other relevant examples. If anyone has any suggestions or examples, it would be greatly appreciated. Saving Changes...
Very interesting topic, I have been working as PMO since last two years and supporting/mentoring projects in estimation and planning activities.
In my view, PMO is a supporting function and mainly involved in supporting/mentoring/training/reporting/tracking and process improvement activities. It's very difficult to justify/measure ROI for PMO related activities. Instead of focusing on ROI, I would suggest to focus on value add in implementing the PMO organization. PMO helps Project Managers to do better planning, estimation, requirement, testing and follow change control process; which is a huge value add and ultimately saves millions of $ for the organization. In our organization, PMO helps Project Managers to estimate total effort/cost, compare the estimate with vendor proposal and reconcile the gap. PMO also support purchasing group to negotiate with vendor. Similarly PMOs are involved in project initiation to make sure all stakeholders are committed to project budget and other planning activities.
Hope this helps
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Basically it is a similar issue to quality and Risk management. How can you quantify costs that are never incurred through taking actions to avoid them? If the organisation accepts the PMO will reduce risk through providing visibility and facts to decision makers, as well as potentially increasing skill sets to increase successful delivery of projects then a basis for qualitative estimation can be made. You need to be careful of purely quantitative analysis because as your skills improve, variability (in time and cost) should decrease for many projects. Saving Changes...
I am interested in this topic as well. In reading through the thread it doesn't appear that we have reached consensus as to how we calculate ROI for the PMO specifically. Does anyone have any proposed formulas they have used in the past? Saving Changes...
One way to establish key performance metrics for a PMO is to use benefits management techniques and focus less on the $ and ROI. Ask yourself what benefits you expect from establishing a PMO, you'll find you can build up a logical chain - eg take the example in Christopher Prokop's post - increased visibility of project info leads to improved decision making leads to increased project success rate. Obviously it is not an exact science, and not all the benefits may be measurable. However if you logic chain is reasonable, the first few benefits will prove to be good leading indicators and it will be worth your while establishing a way of measuring them. You will usually find that the last few in the chain are $ focused benefits and that is good, however by the time these finanacial metrics tell you things aren't good it will be too late! If you want early warning use non-financial metrics. Saving Changes...
Mark Price PerryBusiness Driven PMO Evangelist| BOT InternationalOrlando, Fl, United States
Dear Jacquelibne, I can't find a consensus either, but I have had a bit of advice in this matter. At a recent golf club tournament this subject of PMO ROI came up and to the enlightenment of my PM friends and me sitting at the lunch table, an old silver-haired crusty codger with deep lines of experience running across his faced joined our conversation and barked out that every department of a business must be justifiable and must take the time to measure, test, and communicate its ROI; the PMO is no different. When probed further by one of us 50 year old youngsters about such things as quality, risk, maturity, strategy, etc; he frowned and quipped back, "what did you invest, what was your return?" This old guy was a retired CEO and didn't use a lot of words to make his point. To him, it was very simple and no one was about to pull any wool over his eyes with fuzzy math. It was very refreshing and kind of served as a wake up call that sometimes we in the PM realm tend to think that we are or should be "above the numbers". Though we would never admit to being above accountability, don't ask us to prove it..! Does the math really have to be that hard? In a not too distant Computerworld Article, Williams Elkins discusses Project Office ROI and presents an example of an insurance industry firm PMO that spent $253,000 and saved $2,500,000. The analysis isn't overly complicated or a model that can be applied in a cookie cutter fashion from one PMO to the next, but it serves as a good example of a PMO that conducted an ROI assessment and concluded that real value had been achieved. The following link goes to Mr. Elkins' fine article up on Computerworld. http://www.computerworld.com/managementtop...1,78517,00.html It is an enjoyable, short read. I look forward to hearing and learning from others. This is a great subject. Cheers. -- Mark Perry, VP of Customer Care, BOT International Saving Changes...
