PORTFOLIO, PROGRAMME & PROJECT MANAGEMENT OFFICES A PRACTICAL GUIDE TO SETTING UP A PMO (WITH EXAMPLES)

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1 PORTFOLIO, PROGRAMME & PROJECT MANAGEMENT OFFICES A PRACTICAL GUIDE TO SETTING UP A PMO (WITH EXAMPLES) Developed by the Department of Health Informatics Directorate Informatics Capability Development branch

2 A PRACTICAL GUIDE TO SETTING UP A PMO (WITH EXAMPLES) This guide is primarily intended for use by staff looking to set up (or currently running) a PMO. For the purpose of this guide PMO refers to Portfolio, Programme or/and Project Offices. This guide looks at: PLANNING TO SET UP OR RESTRUCTURE A PMO EMBEDDING A SUCCESSFUL, BUSINESS DRIVEN BY PMO LINKS TO TOOLS TO DETERMINE AN ORGANISATION S P3M MATURITY CASE EXAMPLES

3 TABLE OF CONTENTS 1. Planning to set up or restructure a PMO 2. Embedding a successful, business driven PMO 3. Capturing the benefits of a PMO function 4. Guidance on creating a business case for PMO function 5. Understanding common perceptions of PMOs 6. Case examples 7. Reference materials 8. Checkpoint 9. References

4 1) PLANNING TO SET UP OR RESTRUCTURE A PMO Around half the PMOs created are restructured or closed down within a 2-year time frame. It is recommended that when setting up or restructuring a PMO function, programme management principles for delivering benefits are used to ensure long term success and benefits to the organisation. The diagram below is an example of a lifecycle that can be used when establishing or restructuring a PMO model. This is a project lifecycle for implementing a PMO structure in an organisation. Assess current state of PMO provision What problems are you trying to solve Project lifecycle for implementing a PMO structure in an organisation Identify the PMO Define the PMO Deliver the PMO Closure Define Vision Statement Set objectives and goals Outline Business Case Definition Design how PMO will operate: Design Team Develop Governance Develop Blueprint Develop Full Business Case Plan stages or tranches of delivery Develop and agree phased implementation or transition plan Implementation in stages or tranches Deliver implementation or transition plan Realize Benefits Programme or Project Closure and Review Formal closure, evaluation and lessons learned Mandate Brief PID / Programme Definition and Plan End Programme or Project Report Stakeholder engagement and communications

5 2) EMBEDDING A SUCCESSFUL, BUSINESS DRIVEN PMO It is important that the core focus of the PMO function is on the business in which P3M methods are applied. The following provide some suggested steps to ensure that the PMO function is a business driven rather than theoretical function, and that a culture is adopted where the PMO function supports the organisation s service improvement. Ensure the PMO is aligned to the corporate business planning process Is the PMO integral to the organisation s business planning cycle? Does the PMO play a core role to support corporate strategy delivery? Identify priority stakeholders Have you carried out a stakeholder analysis to understand the different individuals that have an interest in the PMO function? Is there an approach in place to take key individuals through the benefits and role of the PMO function? Have you considered all stakeholders expectations? Do you know all of the information your stakeholders need? Is there senior level support/sponsorship of the PMO function, including a specific senior management champion who is part of the corporate strategy board?

6 2) EMBEDDING A SUCCESSFUL, BUSINESS DRIVEN PMO Develop an implementation plan Have you considered the following as part of the creation of the early stages of the creation of an implementation plan? Staffing, roles and responsibilities, office location, objectives definitions, PM tools definitions, PMO services definition and success definition? Have you considered the following operational actions? Whether you need PM software. Processes for; communication, methodology, staff education, tracking, PMO success metrics, PMO information management processes. Templates, use of templates, major processes. P3M staff forums. An online resource centre where P3M staff can access best practice standards. Looked at internal staff as mentors for other staff. Understand behavioural patterns and reactions Is there a communications plan for the PMO implementation that covers the following: The style and frequency of communications depending on the stakeholder (newsletters, workshops, 1-2-1s) Feedback from a management level on reporting processes Promoting the PMOs identity and service Results and senior public endorsement of the PMO and its role in the organisation Have you taken time to support individuals to understand the PMO functions and how they interact with the PMO? Have you sold the benefits of the PMO function? (See chapter 4 of this guide for benefits return on investment.)

7 2) EMBEDDING A SUCCESSFUL, BUSINESS DRIVEN PMO Ensure the roles in the PMO are appropriate to its function Is there a charismatic senior PMO head? Is the office staffed with competent staff who have had practical experience of running projects and programmes? Can you use internal staff as mentors? Determine the current P3M maturity in your organisation A maturity model (called P3M3) can be used as a guide to identify the level of maturity of 32 different practices covering portfolio, programme and project management. P3M3 provides generic descriptions of each practice at each of the five levels of maturity against which the organisation can be assessed (for link to the maturity model P3M3 see reference materials later on in this document).

8 3) CAPTURING THE BENEFITS OF A PMO FUNCTION Depending on the role of the PMO function and the P3M maturity of the organisation, different benefits can be achieved at different stages: Early stages of a PMO set up Quick and significant benefits that can be achieved in early stages: Embedding standard simple P3M processes including templates Plans, Risks and Issues Logs, Business Cases and Change Control Defining in detail scope, objectives and requirements, defining how deliverables are matched to objectives Providing an independent review and acceptance of project estimates Designing objective criteria for approving and prioritising projects Introducing processes for eliminating projects that don t support corporate objectives Baselining and performing option appraisal and impact assessment in developing business cases and ensuring that benefits and improvements are also measured and owned Implementing change management processes to avoid scope creep and duplication of effort

9 3) CAPTURING THE BENEFITS OF A PMO FUNCTION For more mature P3M organisations, actions to drive continuous improvement may include: Using advanced scoring and ranking mechanisms to prioritise project portfolios, risks, issues and changes Focusing on critical path and managing projects according to constraints, Improving task work flow management e.g. providing automatic alerts on tasks Making project management processes more efficient e.g. using lean six sigma to drive out waste from processes Enhancing measurement and reporting routines e.g. measuring earned value, developing dashboards and drilling down from RAG status reports Using project and knowledge management portals (i.e. Microsoft Project Server, EPM and SharePoint) to improve efficiency and promote information sharing Providing an ongoing programme of training, support, coaching, mentoring, and accreditation Providing information on resource capacity and availability when considering the balance of new project work with business as usual needs

10 4) GUIDANCE ON CREATING A BUSINESS CASE FOR PMO FUNCTION A PMO model should have a formal agreed business case outlining it s functions, costs, benefits, constraints and risks. An example business case is contained within the OGC s P3O guide Appendix B Example Business Case p Centre/Best-Practice-Guidance/P3O/ Building the case A business case for a PMO model should show a significant return on investment (RoI). Below are some steps and examples on what could be included to demonstrate RoI: Step 1. Assess current PMO capability in terms of resources, skills, organisation and services. Step 2. Assess current costs and business benefits. Costs include PMO resource cost, systems, tools, infrastructure, governance, training and support. Benefits Associated with delivery of projects to time, quality and cost and customer satisfaction (tangible): Estimate of total and average value planned and achieved from the current project portfolio i.e. the value generated from past and current projects measured in net present value (NPV). Performance on current project cycle time measured as a saving on capital, labour and overheads as appropriate plus revenue gained. Penalties and bonuses incurred on late project delivery. Cost of quality, performance on operational and service level agreements (OLAs and SLAs). Key performance indicators (KPIs) related to project performance e.g. % completion to time, quality and cost (converted into monetary values), response times, value of changes to original budgeted cost and benefit, % and value of rejected projects.

11 4) GUIDANCE ON CREATING A BUSINESS CASE FOR PMO FUNCTION Hidden costs: Time and resource that is wasted due to re-work or other attribute. Indirect overheads e.g. management time not apportioned. Intangible benefits: Project customer and employee satisfaction, and brand reputation as a consequence. Step 3. Establish baselines and benchmark current performance. Step 4. Interpret business objectives and drivers and how PMO can support them. Step 5. Identify operational and programme management improvement opportunities. Step 6. Finalise programme management development plan and business case. Example key performance indicators There are a number of key performance indicators (KPIs) that can be included in a business case for a PMO model. The following are KPIs that may be considered: % increase in actual benefits delivered by the portfolio. Reduction in programmes/projects started fro the wrong reasons. Increased level of P3M maturity of the organisation. % increase in number of programmes and projects delivering to time and scope. % decrease in cost overruns on programmes and projects. Reduction in overall resource costs to deliver the portfolio. Reduced staff turnover and subsequent recruitment/training costs. Increase customer satisfaction scores. Reduced number of programmes/projects scoring amber or red on gateway reviews.

12 5) UNDERSTANDING COMMON PERCEPTIONS OF PMOs Those working within or establishing a PMO structure should be aware of common perceptions of its functions. The benefits and RoI examples in this guide should be widely promoted across the organisation to overcome some of the perceptions listed here. Senior and middle managers Large overhead Not business driven or focussed P3M seems theoretical Drain on organisation s productivity Less time to actually deliver A potential threat to authority Exposing true facts and figures Project staff Bureaucratic processes It is simply a templates police No one reads the forms A one way process Hinders more than helps

13 6) CASE EXAMPLES The links below provide examples and lessons learned where organisations have set up or made changes to their PMO functions. Please note that these are specific to the particular organisations and may be relevant depending on your organisation requirements. A case study describing how a Portfolio Management Office helped the senior management at BT Design make business-critical decisions. British Telecom example

14 7) REFERENCE MATERIALS Portfolio, Programme and Project Management Maturity Model (P3M3) A maturity model produced by the OGC bility/maturity/index_html/

15 8) CHECKPOINT Have you created a full implementation plan to restructure or set up your PMO function? Does your implementation plan include: An assessment of the current state of your PMO function and any future goals? A full definition of how the PMO will operate? The different stages of implementation? Have you taken steps to ensure your PMO function is aligned to corporate business planning processes? Have you identified priority stakeholders and taken action to ensure the PMO function meets their expectations? Have you established senior level endorsement of the PMO function? Have you considered using the OGC s P3M3 maturity model to determine current P3M maturity in your organisation? Have you had access to other organisations lessons learned, advice or best practice suggestions when making changes or setting up a PMO function?

16 9) REFERENCES Getting Return on Investment from your Programme or Project Management Office The ProjectPlus Group Dave Rochford BSc, MA, Fellow CMA & Iain Fraser, PMP, PMI Fellow, Fellow PMINZ Project Plus Ltd Portfolio, Programme and Project Offices Office of Government Commerce Published by TSO P3M3 Portfolio, Programme, and Project Management Maturity Model (P3M3) Office of Government Commerce Released in June 2008 How to change project culture through implementing a PMO: a real case study Alfonso Bucero (PMP) Hewlett Packard

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