Unlocking pmo profitability

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Unlocking pmo profitability

  1. 1. Unlocking PMO ProfitabilityThe potential benefits of a project management office (PMO) are many and well-documented. However, a number of the benefits never materialize. Take a look atPMOs over the years and you will see that many have restructured, dissolved, orconstantly justified their existence during both economic downturns as well ashigh-growth periods. This is evidence enough that PMOs are not yieldingdemonstrable positive financial results. This churn often causes years offrustration for both the PMOs and the projects and departments they serve.Changing the way in which the PMO is chartered, works, and is perceived withinan organization can ensure that it offers plentiful advantages for the entireorganization.Two Problem Scenarios and Strategies to Resolve ThemFirst Problem: The PMO is spawned by an executive with a big problem. A clientforms a PMO to salvage a huge contract with a customer. A very large projectlags, causing late deliveries and missed expectations all around. Department staffis not completely honest with the customer, hoping that they will somehow beable to “catch up.” The department falls further behind and an executive is forcedto intervene. Experienced senior project managers are brought in to assist withthe problem, turn around customer expectations, and establish communicationand estimation processes within three months. In another four months, theproject managers turn the projects back over to a grateful department.The senior project managers who saved the day wonder, “Now what? We hadunrestricted executive access; some of the best people across the organizationwere loaned or transferred to our projects and spent tens of thousands of dollarson training, equipment, and process improvement. Results were great. Now wecan’t get a phone call returned from a director outside the PMO, or any attentionpaid to the best practices we just proved are necessary to keep projects out of thered zone.” Three of the four project managers are let go or quit within the next sixmonths, along with half of the PMO staff of 20.
  2. 2. This example is not just for illustration; it is happening every day in organizationsall across the country. If the PMO is helpful in solving the big problem, then PMOstaff members must assume other roles to continue to justify their existence.When PMOs define their own course, the high-percentage outcome is stagnatedby over-regulation and process. It does not take long for the PMO to lose powerand possibly be disbanded.There are four strategies to employ so that the PMO remains financially viable:Always take on the big problems. Put the PMO on each issue as a fix-it orturnaround weapon.Key deliverables to leave behind should include significant process improvementsthat equip your internal customers with tools they didn’t previously have thatmake them more successful going forward.Processes used should include mentoring and training key people in the problemdomain so that the fixes the PMO put in place become permanent.Help the involved departments win their battles, shore up their defenses and thenmove on to the next big problem.Second Problem: The PMO is spawned by one or more executives who want morevisibility or compliance via governance efforts but don’t really want lastingchange. A large organization takes a hit in its most recent audit for compliancewith Sarbanes-Oxley and internal policy governance requirements, which affectsthe organization’s financials. The projects in violation include those IT-relatedprojects. Several of the COO’s direct reports band together to review the situationcaused by a colleague who is now out of favor.They recommend many process changes at a high level. The approach is: “Theyshould have done this, this, this, and that.” No one considers or estimates thetime and effort (person hours), training or persuasive change managementrequired to move the entire staff to a phase-gate approval process. (A phase-gateapproval process requires the project manager to prepare a project status reportat the end of every phase and submit it to senior management for approval to
  3. 3. move on to the next phase of the project.) A project is chartered, training isauthorized, tools are purchased and installed—not implemented, just installed—and a set of instructions delivered directly to the PMO—not the departments—toget cracking.At this point, department heads and their direct reports begin a campaign toundermine PMO authority, which is quickly degrading. Eventually, the PMO isdisbanded and the PMO director is fired for not being able to work with his peers.The organization’s compliance is upgraded from a complete failure to spotty (atbest), which requires a good deal of convincing.Financially, a PMO tasked with making other departments comply with vague orsecondhand demands is destined to fail. PMOs in this position can be misused asmerely lip-service providers for governance coverage required by Sarbanes-Oxley,FDA, and other regulatory, investor and customer requirements.In this scenario, there are three strategies to employ for the PMO to remainfinancially viable:Show that complying with executive mandates through a PMO is faster andcheaper.The PMO should be the leverage point and path of least resistance for complyingwith executive directives, not the source of those directives.PMO staff effort should not be billed back to the department. This will ensure thatPMO resources are welcomed and not shunned.Showing PMO Value: - The difficulty in demonstrating real value from the PMO istwofold. First, traditional financial measurements of PMO success do not usuallyprovide immediate, tangible benefits. There are many simple metrics that can beused to show the number of projects being completed on time and within budget.However, this data can be misleading. A possibly misconstrued metric would be,“We have never brought a $10 million dollar project in on time or within budget.”On the surface, that may sound irresponsible. In reality, it is due to an unrealisticplan and lack of deeper collaboration with project sponsors, executives and teams
  4. 4. on all of the project’s dimensions — all of which comprise more than just timeand money.Second, the assigned role of the PMO in a given organization may not beappropriate, and can ultimately serve as an impediment to the execution ofprojects if not employed correctly. As seen in the second problem scenario above,PMOs that act as a regulatory force without clear directives and sponsorship fromsenior executives only make the project manager’s job more difficult.Making It Work:-How can you use your PMO in a way that maximizes its potential and improvesyour organization’s ROI? The groundwork for a successful PMO actually begins atthe top. A PMO requires sponsorship from C-suite level executives in order tobuild and maintain a presence across the organization with the flexibility requiredto address various important project management issues. Allowing the PMO to doits job with executive backing will empower the PMO to address widespreadissues quickly and effectively.There is no one right way to implement a PMO. Rather, the organization’s specificissues will drive the structure and operation of the PMO. When considering whereto go with a PMO, an organization should ask the simple question, “Whatproblems prompted the creation of the PMO in the first place?” Assign the PMOto those tasks, and extend its reach as necessary to enable smooth operations.There are three metrics commonly used to determine the effectiveness of a PMOat any given time:Accuracy of cost estimates: How close is the final cost of the project to the initialbudget?Accuracy of schedule estimates: How long did the project take to complete incomparison to its original schedule?Stakeholder satisfaction: Overall, how happy were the stakeholders with the finalproject and their relationship with its developers?
  5. 5. Improvement in each of these three categories is a good indicator that the PMO isworking smoothly and in the best financial interest of the organization.As more and more projects are supported by the PMO, specific patterns in projectexecution will emerge and its predictive accuracy will increase. In this way, thePMO is constantly self-improving and will eventually become a cost-saving nexusof efficiency within your organization.For further information visit:http://businessedge.michcpa.org/issue/article.aspx?i=v8n12&a=541&s=MI

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