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Program Management Outsourcing: Challenges & Factors Contributing to Success
This document presents a study on program management outsourcing, focusing on the challenges and success factors associated with it. Key issues identified include client-pmc cultural differences, lack of governance structures, and inadequacies in client competencies. Recommendations for improvement emphasize developing organizational maturity, establishing a Program Management Office (PMO), and creating effective contracts and governance models.
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Program Management Outsourcing: Challenges & Factors Contributing to Success
- 1. Program Management Outsourcing: Challenges& Factors contributing to success Session # EM14CPX02 Moataz Y. Hussein, OPM3, PgMP, PMP, PMI-RMP OPM Consulting (OPMC)
- 2. This research studyhas been conducted in collaboration with Dr. Homayoun Khamooshi, an Assistant Professor in the Department of Decision Sciences at the School of Business of the George Washington University (GWU). He is the chair of the Master of Science in Project Management program. ACKNOWLEDGEMENT
- 3. Overview Key Factors inProgram Management Outsourcing Survey Demographics & Results Outsourcing Challenges Syndromes Recommendations & Proposed Governance Structure Conclusion AGENDA It is assumed that the audience have already experience in Program Management, Outsourcing, Program Governance, Business Case, delivery models and compensation models, etc. These definitions won’t be discussed in the presentation.
- 4. Client versus thePMC perception on these factors and the perception on the value of using a PMC Views of practitioners and academics on Program Management Outsourcing. Proposed PMC-managed program governance structure. Level of client’s organizational maturity key factors which impact the PMC- managed programs and Investigate to what extent they exist in practice. The most important links to build a strong outsourcing capability chain. 3 4 7 5 6 2 1 2 3 4 5 6 Our objective is to identify and investigate… Manage ment Governance team PMC Contract ors Consulta nt PAO PMO
- 5. Program Management Outsourcing Challenge (Missing Enabler) SuccessFactor or Capability (Present Enabler) Our objective is to identify and investigate
- 6.
- 7. YOUR LOGO +60% * TheMcKinsey Global Institute (MGI), 2013 1995 2012 2013 2030 Global Infrastructure Investment $36 Trillion $57 Trillion
- 8. The clients gofor well-known PMC’s
- 9. Owner-managed, with PMC providingstaff support integrated owner and PMC team PMC-managed Program management at risk Organizational Models used when hiring a PMC
- 10.
- 11. YOUR LOGO Competent StaffPrevious Similar Experience Delivering Programs on timeWorld-class tools & processes
- 12. YOUR LOGO % ofmega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010 90%The clients go for well- known PMC’s to transfer the risks resulting from program complexity and lack of skills and expertise. 90% % of mega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010 90% % of mega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010 How Did Things Go with infrastructure programs?
- 13. YOUR LOGO % ofmega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010 90%The clients go for well- known PMC’s to transfer the risks resulting from program complexity and lack of skills and expertise. 90% % of mega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010 90% % of mega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010 90% % of infrastructure programs suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010
- 14. YOUR LOGO % ofmega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010 90%The clients go for well- known PMC’s to transfer the risks resulting from program complexity and lack of skills and expertise. 90% % of mega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010 90% % of mega infrastructure projects suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010 WHY? % of infrastructure programs suffer from some cost overruns and more than this percentage experience schedule delays. Booz & Company, 2010
- 15. KEY FACTORS INPPROGRAM MANAGEMENT OUTSOURCING YOUR LOGO
- 16. Effective change management Regularclient consultation Reliable estimates Positive organizational culture Clear prioritization of project goals by the client Learning from previous experiences Clearly written lines of responsibility Client acceptance of plans Feedback capabilities in the system Awarding bids to the right designers/contractors Mutual trust among project stakeholders Creating accountabilities Top management sponsorship Building a balanced and winning team Knowing what the client really wants Competent project manager WBS linked to OBS Goals and priorities Effective project planning and control Proven methodology Sufficient resources Responsiveness of client Strategic alignment verify progress Clear and detailed written contract High quality workmanship Critical Factors that impact large scale-projects Effective project control mechanics Good relationships with project stakeholders Toor and Ogunlana, 2008
- 17. Stakeholder Engagement PMO & Program Auditfunction PMIS Roles, Responsibilities & Delegation Client’s Support PMC compensation Model & Risk Allocation Program Governance Program management Practices & Processes Client’s Competent Staff Transition (Handover) Client-PMC culture Business Case Factors Contributing to Program Management Outsourcing Success
- 18. Stakeholder Engagement PMO & Program Auditfunction PMIS Roles, Responsibilities & Delegation Client’s Support PMC compensation Model & Risk Allocation Program Governance Program management Practices & Processes Client’s Competent Staff Transition (Handover) Client-PMC culture Business Case Program Management Outsourcing Capability Chain
- 19.
- 20. YOUR LOGO 16% Survey ResponseRate 1200 193 Survey Recipients Survey Respondents
- 21. Client PMC Breakdown of respondentsby organizational type 76.8%
- 22. Breakdown of respondentsby value of program 25.4% 40.8%
- 23. 4.6% SOUTH AMERICA Breakdown ofrespondents by region 17.6% NORTH AMERICA 8.5% EUROPE 16.2% ASIA 4.9% AUSTRALIA 16.9% AFRICA 31 % MENA
- 24. 33% Roads & Highways 32% Large Scale Buildings 25% Power 33% Water& Drainage 31% Oil & Gas 18% Healthcare 16% Ports 12% Rail 31% Telecommunication 18% Others X Breakdown of respondents by Type of Program
- 25.
- 26. Stakeholder Engagement PMO & Program Auditfunctions PMIS Roles, Responsibilities & Delegation Client’s Support PMC compensation Model & Risk Allocation Program Governance Program management Practices & Processes Client’s Competent Staff Transition (Handover) Client-PMC culture Business Case We wanted to rank the weak links (factors) in the capability chain
- 27. ① Client-PMC Cultural Difference ②Absence of PMO & Audit ③ Lack of Client’s Competent Staff ④ Improper PMC Compensation Model & Risk allocation ⑧ Unclear Responsibilities & Delegation ⑦ Lack of transition & handover plan ⑥ Poor Stakeholder Engagement ⑤ Absence of Governance Model⑨ Lack of Client Support ⑩ Lack of business case ⑪ Improper PMIS ⑫ Improper Program Management Methodology 82% 38% 64% 63% 60% 56%56%54%54% 52% 47% 41%
- 28. 73% 65% 58% 53% 53% 86% 76% 69%65% 61% Client-PMC Cultural Difference Absence of PMO & Audit Lack of Client’s Competent Staff Improper Compensation Model & Risk Allocation Lack of Governance Model Client PMCClient PMC Client versus PMC perspective on the top ranked missing factors
- 29. Client PMC ① Theclient / PMC cultural difference ② Absence of PMO and Program Audit functions ③ Lack of Client's Competent staff ④ Improper PMC compensation model & risk allocation ⑤ Absence of Governance structure ⑥ Poor Program Stakeholder engagement ⑦ Lack of a transition (Handover) plan ⑧ Unclear Roles, Responsibilities and delegation ⑨ Lack of Client Support ⑩ Lack of Business Case ⑪ Improper PMIS ⑫ Improper Program Management Practices, Processes and Methodologies Responsibility for the key factors in the capability chain
- 30. Although the Stakeholderengagement is the responsibility of the PMC, however, the client must play a key role in the stakeholder engagement specially if he PMC is a foreign firm. It has been noticed in several infrastructure programs that leaving the stakeholder engagement faction to a foreigner PMC firm led to unfavorable results. Although the PMC needs to setup a PMO & audit function, develop proper governance structure, identify the roles & responsibilities within the program organization; this does not substitute the client’s role to setup and develop these functions within the parent organization in order to manage the relationship between the parent and program organization (outsourcing relationship) effectively. Comment on the Responsibility for the key factors in the capability chain* * This comment has been added after the congress session as a clarification based on the discussion with some of the attendees.
- 31. YOUR LOGO % ofthe survey respondents believe that the PMC is an added value to the client’s organization % of the client’s organization respondents have the same belief The Perception on the Value of PMC 80% 70% Client
- 32. Performed: PM Processes unpredictable,poorly controlled and reactive Managed: PM Processes characterized for projects and are often reactive Defined: PM Processes characterized for the organization and are proactive Quantitatively Managed: The PM processes are measured and controlled Optimizing: PM processes are continuously improved Level 5 Level 1 Level 2 Level 3 Level 4 23% 47% 18% 5% 7% Client Organizational Maturity
- 33.
- 34. A syndrome, inmedicine and psychology, is the collection of signs and symptoms that are observed in a single condition Murphy's Laws, in Management, when one thing goes wrong, EVERYTHING starts to go wrong
- 35. ① Client-PMC CulturalDifference Top 5 challenges which face the outsourcing relationship organizational cultural difference resistance to cooperate with the PMC socio- economic difference Competency Difference resistance to change the old work practices Fear of losing authority Fear of losing job Resistance Syndrome
- 36. ② Absence ofPMO and Audit function Top 5 challenges which face the outsourcing relationship No Standardized Processes old and new work practices go in parallel Poor coordination & integration No resources & time optimization More than one version of the story Same mistakes.. Again & again Inefficient decision making Continuous NON improvement Syndrome
- 37. ③ Lack ofClient Competent Staff Top 5 challenges which face the outsourcing relationship Poor program governance resistance to cooperate with PMC No common language between Client & PMC Blame Culture resistance to change the old work practices Fear of losing authority Fear of losing job Poor Competency Syndrome
- 38. ④ Improper PMCcompensation model & risk allocation Top 5 challenges which face the outsourcing relationship High risk profile Denial and avoidance state Conflict of interest Too many changes and claims Blame Culture Behind Schedule Over budget Improper Contract Syndrome
- 39. ⑤ Absence ofGovernance Structure Top 5 challenges which face the outsourcing relationship negligence to client’s oversight role Over-Control “Circle of non- trust” Over-reliance on the PMC “Blind trust” Poor contract administration Blame Culture Undefined responsibilities Improper performance management Improper Governance Syndrome
- 40.
- 41. ① Improving theorganizational maturity and developing the client’s staff competencies Recommendations Fight the resistance syndrome before the commencement of the program! Assess staff competencies Continuous Communication with staff Assessing OPM maturity OPM improvement initiatives. Change Management Program Recruiting the right people to fill competency gaps. Staff competency development programs.
- 42. ② Setting upa Program Management Office (PMO) and a Program Audit Office (PAO) Recommendations Setting up a PMO & PAO and positioning them in the top level of the organization structure does not guarantee their success! Clear Responsibilities & level of authority of the PAO PAO team ask the right questions Clear Responsibilities & level of authority of the PMO Staff them with highly qualified people Guide the PMC regarding organizational & environmental factors Have senior management support. PMO and the PAO are independent business units
- 43. ③ Developing agood contract with a proper PMC compensation model and risk allocation Recommendations The most critical part of the PMC contract is the financial structure, it’s the client’s responsibility to do it right from the beginning! Clear Contract that leaves no space for imagination Progress-based payments, not resource- based The right outsourcing model Scope, Scope and Scope A performance based risk- sharing contract is better The PMC is NOT resources provider The PMC is a delivery partner
- 44. ④ Developing aproper governance model with clear roles, responsibilities, and delegation Recommendations Clients can definitely outsource program management, but they cannot outsource Program Governance! Clear Client- PMC accountability Clarify the role of the PMO and the PAO in the program organization. First thing in the program Common agreement on the success criteria Agreed upon technical & financial delegated authority Agreed upon program change management process Common agreement on Performance management
- 45. YOUR LOGO PROPOSED GOVERNANCESTRUCTURE
- 46.
- 47. 0 1 2 3 4 5 LevelofrequiredPMC Oversight Level of Client-PMCTrust 0 1 2 3 4 5 Efforttoperform oversight Level of Client’s OPM Maturity 0 1 2 3 4 5 Levelofwell- documentedgovernance model Level of Client’s OPM Maturity 0 1 2 3 4 5 Levelofwell- documentedgovernance model Level of Client-PMC Trust Factors which impact setting the levels of change and the level of oversight
- 48.
- 49. ② Absence of PMO& Audit ③ Lack of Client’s Competent Staff ① Client-PMC Cultural Difference ④ Improper PMC Compensation Model & Risk allocation ⑤ Absence of Governance Model 2+2=3 2+2=4 2+2=5 Top 5 challenges (weakest links) in the Outsourcing capability chain
- 50. ② Setting upa PMO and a real PAO ③ Developing a good contract with a proper PMC compensation model and risk allocation ① Improving the organizational maturity and developing the client’s staff competencies Project Management Program Management Portfolio Management Strategy Top 4 enablers (links) for strong Outsourcing capability chain ④ developing a proper governance model with clear roles, responsibilities, and delegation
- 51. 53% Of the Clients’ respondents Believethat their organizations lack competent staff and proper governance structure. 53.3% Of the Clients’ respondents 82% Of the respondents Believe that the Client-PMC cultural difference is the biggest challenge. 65% Of the Clients’ respondents believe that their organizations don’t have a proper PMO and program audit 75% & 100% 75% of the identified challenges are the responsibility of the client, and the top 5 challenges are also the responsibility of the client. 70% Of the Clients’ respondents Believe that PMC is an added value to their organization 70% Of the respondents Rated the client’s organization maturity as either level 1 or level 2 performance based risk- sharing contract A performance based risk-sharing contracting strategy would be a better approach compared to the currently used contract types Client-PMC agreement Client & PMC agree on the top 5 challenges that face program management outsourcing.
- 52. One more thing… Thisstudy is neither promoting the PMC over controlling behavior nor giving them a free rein It is an invitation to the Client and the PMC to find the right balance of responsibility and build a mutual trust
- 54. Moataz Yousif Hussein Consultant,Project & Strategy Management OPM Consulting (OPMC) 113 Barksdale Professional Center Newark, DE 19711 USA USA: +1 916-273-3331 Qatar: +974 66490135 moataz@gwu.edu moataz@opmc.com http://qa.linkedin.com/in/moatazyousif/