Strategic PMO: Tomorrow s Business Necessity

Transcription

1 THOUGHT LEADERSHIP WHITE PAPER In partnership with Strategic PMO: Tomorrow s Business Necessity The PMO is changing or perhaps more accurately, the PMO needs to be changing. It doesn t matter whether a PMO to you means a project management office or a program management office; things are never going to be the same again. In recent years, organizations have embraced the idea of portfolio management to provide a common, strategically aligned approach to project execution and now they expect the PMO to play a key role in driving that approach forward. That requires the PMO to evolve from a project support function to a vital business leadership function with accountability for leading organizational transformation. In this white paper, we are going to explore what the PMO of the future should look like and provide some guidance on how to make the transition. Before we start, let s look at a quote that should drive fear into any organization that thinks that they currently have a strong and stable portfolio management approach: PPM leaders must prepare for extreme transformation or prepare new résumés. The quote is an attention getter and perhaps a little unsettling, but what elevates it to the level of fear is its source: It s one of Gartner s predictions for So now that I have your attention, let s understand a little bit of what sits behind the quote. Gartner s argument is that businesses are going to be faced with a period of considerable organizational transformation driven by economies, technology capabilities, etc. That clearly needs to be managed

2 through a project portfolio management function because that is the model that organizations have evolved to over the last few years. That PPM capability has to reside somewhere within the organization, and in most cases the PMO is the logical choice. However, that can only happen if the PMO adapts and evolves to support a strategic portfolio; otherwise, the organization will shift accountability for the portfolio elsewhere and the PMO will struggle to justify its existence as anything more than a support function. Organizational transformation is no longer going to be an occasional activity; it is going to be the new norm. The speed of technology innovation and the elimination of traditional technology restrictions will allow organizations to shift to a product-driven focus that will impact all areas of the business. A Strategic PMO Organizational transformation is no longer going to be an occasional activity; it is going to be the new norm. The speed of technology innovation and the elimination of traditional technology restrictions will allow organizations to shift to a product-driven focus that will impact all areas of the business. Successful delivery of goals and objectives is going to require significant contributions from all areas of the business, even groups like IT that have not traditionally been accountable for business goals. That will reduce the need for traditional project managers who focus solely on technical deliverables and require project execution (and by extension, project managers) to be focused on the achievement of business needs. This will create a new breed of business project managers who may not even initially have traditional project management skills those can be taught. Instead, they will be managers who understand the importance of their projects to the success of the business and will manage accordingly. This is a theme that we will return to throughout this paper. Driving Organizational Transformation As the controller of project execution within the organization, this will put the PMO into a critically important position to drive project success. The PMO will need to support and lead a very different project execution function and will have less value to offer at the individual project level; the PMs will be more capable of managing traditional PMO issues because they will have the relationships with business functions and an understanding of the business drivers behind their initiatives. This will result in the PMO needing to move to a more strategic level where they can deliver real value for the organization, and that will have a number of different elements. Firstly, the PMO will need to ensure that the approved portfolio is capable of delivering the organizational goals and objectives. This will require involvement in (and capability to deliver): Portfolio planning: The PMO should consider the project mix; this will involve the ability of each proposed portfolio to deliver the expected result as well as the ability of the organization to deliver that portfolio everything from budget and resources to risk capacity. 2

3 Prioritization and allocation: Working with business leaders to ensure that the project budget is appropriately allocated across the organizational needs. While transformation initiatives will become more common and will drive the ability to achieve goals and objectives, there still needs to be investment in maintenance and continuity initiatives, regulatory compliance projects, etc. In the future, PMOs need to be able to drive this activity for the organization they need to be the conduit through which transformation initiatives are reviewed and they need to be part of the executive approval process. Resilience planning: Projects, especially major transformations, can be extremely disruptive to the impacted business areas and consideration has to be given to ensuring that work is planned to minimize productivity impacts, avoid repetitive disruptions and align project execution with other elements of organizational change management. Capacity planning: Ensuring that planning is in place to have the right number of people with the right skills in the right places at the right times to deliver the selected portfolio mix effectively and efficiently. This is more than just right sizing, it also requires right skilling. Some PMOs today have elements of this accountability, but generally in a facilitation capacity; they act as a central consolidation function on behalf of executives. In the future, PMOs need to be able to drive this activity for the organization they need to be the conduit through which transformation initiatives are reviewed and they need to be part of the executive approval process. Once the portfolio has been approved, the role of the PMO needs to shift to one of strategic execution. With more business-focused project managers leading individual initiatives, the PMO is free to focus on the overall performance of the portfolio. The portfolio is the vehicle by which an organization delivers against its goals and objectives; during execution, the PMO needs to be making continuous adjustments to ensure that alignment remains. Individual initiatives will deliver above or below expectations, their benefits will occur earlier or later than planned, and they will last for longer or shorter periods than forecast. All of these are inevitable, but all of them impact the organization s ability to deliver against its objectives. At the same time, the environment that the organization operates within will be constantly changing, creating threat and opportunities that will need to be responded to. The PMO needs to retain a business-goals focus and drive changes into the projects and programs that make up the portfolio in order to preserve strategic goal alignment. On occasion that may occasionally mean sacrificing an individual project that is proceeding exactly as expected if it frees up resources for other areas that can make a more significant contribution to the organization s success for example. This is an ongoing requirement to move the elements of the portfolio around in order to try and ensure that the chances of portfolio success are always maximized. The PMO must also look beyond its traditional scope. Portfolio management is a business function, not a project function so the PMO can t simply align with the project lifecycle. Instead, the PMO needs to 3

4 take accountability for the portfolio from idea generation to benefits realization. In this way, the PMO can ensure that ideas are encouraged that will align with the stated goals and objectives and that those ideas are captured and developed in a consistent manner regardless of where they originate from. In the future, the PMO will be expected to be the face and voice of the organization when it comes to strategy execution. As the ideas are developed, the PMO needs to facilitate consolidation and enhancement of those ideas and provide the template for business case development that will allow for initiatives to be objectively compared during planning (although objective criteria should not be the only determining factor in approving projects). Once the project has been successfully completed, the PMO needs to confirm that the expected business benefits are actually occurring. While the ultimate revenue generation or cost-saving benefit ownership will likely remain with the functional unit that benefitted from the project, the PMO is a vital stakeholder in that process. The PMO of the future will be accountable for ensuring that the portfolio delivers the business goals, and the only way that can occur is through benefits realization. If a new product falls short of revenue targets, then the PMO needs to find that benefit elsewhere in the portfolio and that may well mean adjustments to projects that are currently underway. At present, organizations look for tactical, self-contained solutions to revenue or cost-saving misses adjusting pricing, creating promotions, restricting expenses, etc. While these measures will remain valid, the growth in organizational transformation initiatives will provide much greater opportunities to address variances through future projects. However, this can only happen if the PMO has timely and accurate visibility into real benefits realization numbers. The Face of the Organization Today s more proactive PMOs may have education processes in place to try and help project execution staff understand the business drivers behind the projects that they are working on. However, most PMOs don t have such a model in place and even those that do usually only view this as a minor valueadd function. Even fewer PMOs have any kind of ongoing relationship with areas of the business that aren t involved in project execution beyond individual stakeholder meetings, there is likely to be no connection at all. In the future, the PMO will be expected to be the face and voice of the organization when it comes to strategy execution. Project execution will be driven from the portfolio down, more accurately reflecting the alignment of work with the goals and objectives of the organization. The PMO should play an active role in aligning projects to the organization s objectives as a key participant in the annual planning process. The PMO should also strive to gain visibility into the project review and approval process and pull the various spreadsheets or off-line decision making tools into a more real-time approach. As such, portfolio management (the most important function within the PMO of the future) will drive all project execution activity. That will require strong and visible leadership that can reach all areas of the organization and can drive appropriate behavior. 4

5 This is a quantum shift from the way that the vast majority of PMOs are viewed today and will require a fundamental reinvention of the PMO function. This kind of change is not going to occur through organic evolution, at least not nearly fast enough; it will need executive-level commitment to reinventing the PMO as the hub of all portfolio execution activity. That activity will be centered on two guiding principles: consistency and visibility. In even the most transformative of organizations, there will be a number of projects that have little strategic impact keep the lights on type initiatives, for example. Consistency will be focused on ensuring that all project execution throughout the organization aligns with the goals and objectives that the organization is trying to achieve. The era of departmental special projects or informal initiatives that aren t part of any formal planning process is over; organizations cannot succeed if there is any degree of misalignment with the organizational priorities. This isn t an exercise in trying to exert greater control; with farreaching organizational transformation initiatives, it s vital that all impacted areas are aligned for the change. Within the portfolio framework, individual departments and project teams will likely find that this change in the PMO function results in them having greater tactical control of project execution. With an increase in business-focused project management, the decision-making process can be flatter and decisions don t have to be escalated through PMO and multiple stakeholder levels. Instead, the project managers and key stakeholders will be able to act as they see fit as long as they remain aligned with the portfolio goals. There will be occasions where portfolio-driven changes are implemented on their projects in response to internal variations from plan or external factors beyond the organization s control, but that is no different than any other source of project change. In even the most transformative of organizations, there will be a number of projects that have little strategic impact keep the lights on type initiatives, for example. The PMO of the future will have no accountability for those projects they will be controlled autonomously within the appropriate business departments, and the only PMO involvement will be in understanding the resources that those initiatives are consuming. There may still be impact if those resources are required for strategic initiatives, and that will drive scenario-specific PMO engagement; but those initiatives will be consciously positioned outside of the portfolio, and hence the PMO. This consistency element of the future PMO s work can only occur if the PMO also delivers the other principle visibility. This is not the traditional PMO perspective of gaining visibility into the work being done at the project level; rather, it is a reversal of that traditional approach. Rather than rolling up information from project to program to portfolio, the PMO will provide visibility to the project execution teams. The evolution of project management to a more business-focused discipline is more than just ensuring that project managers understand the business; they also need to understand the strategic drivers for the projects that they are undertaking. Project managers will shift from being focused on deliverables to being focused on delivering the business benefits that their project s deliverables are 5

6 intended to facilitate. They must be prepared to change the deliverables in order to preserve the benefits sacrificing project elements to protect the return on investment. In order to do that, project execution teams will need more than simply a summarized list of the organization s goals for the current period they need a detailed understanding of the role that they are expected to play. That means that the PMO needs to ensure that every project team within the portfolio has an accurate, complete and up-to-date understanding of: the future PMO as the voice and face of the organization for strategy execution it will be the conduit for all of the information that will drive project execution behavior. The contribution that their project is expected to make. The specific goal or goals that are being supported by the project and the size of the contribution that the project needs to deliver. These may be direct benefits (a new product is expected to generate $X million in revenue) or indirect (the company wants to increase its overall market share by Y%, and this product will help achieve that). The impact that shifting priorities will have on their project. There needs to be an understanding that as real project results deliver variances from expected project results, changes will need to be made within the portfolio and those changes may impact perfectly good projects. The PMO will need the support of project managers to conduct those impact analyses so that effective and efficient decision making can occur. The overall portfolio direction and priorities, as well as the variances from those priorities that may apply at the individual project level. For example, if an organization is looking to rapidly expand, then they may well put revenue and market share targets ahead of cost-reduction measures being willing to sacrifice budget and risk (and perhaps even quality) to preserve scope and schedule. That should provide general guidance to projects in their decision making, but not all projects will be able to follow the same approach and those variations must be understood. It s easy to understand why we see the future PMO as the voice and face of the organization for strategy execution it will be the conduit for all of the information that will drive project execution behavior. If the PMO is unable to do this (either because of organizational positioning /acceptance or because of a lack of skills within the PMO), then there is no way that the organization will be as successful in driving transformation. It s also easy to see that very few PMOs will be capable of performing this function without significant change, so now let s look at how those changes can occur. Changing the PMO The kind of fundamental change that we are discussing here cannot happen overnight; it will require significant investment of time and money in developing PMO capability and reinventing the PMO s position in the organization. However, there also needs to be recognition that organizations cannot be patient and allow for this change to happen organically. The quote from Gartner that I gave at the start of this paper is a prediction for this year organizational transformation is already accelerating, and 6

7 most organizations are frighteningly underequipped to effectively control major strategic portfolios. Business leaders need to begin driving this change now. Building the Right Skills The future PMO will need a business leader with sufficient acumen to understand the organization s goals and objectives... The first and most fundamental change that many organizations have to make is to ensure that their PMO is actually a business function and not a project function. Every PMO should have a business plan that is reviewed, approved, managed to and assessed for each planning period. Not only do business plans not exist in many PMOs, most organizations don t recognize that this is a problem. Perhaps worse, many PMOs have a PMO charter instead. How many key business functions have a charter? How many departments are allowed to get away without having a business plan? Other than the PMO, the answer is obviously none. Once the organization has established the purpose of the PMO (and the first half of this white paper suggests a purpose that might be appropriate), the right leader needs to be selected and put in place. Historically, PMO leaders have come from project execution backgrounds. While there is nothing fundamentally wrong with that approach, it doesn t always ensure that the appropriate business management capability is in place. The future PMO will need a business leader with sufficient acumen to understand the organization s goals and objectives, what needs to be done to deliver those goals and how to maintain that focus when things change. The PMO head also needs to be an individual who can build relationships in all areas of the business and can earn respect from all levels. These leaders are not common, but they are vitally important you are giving this person control of the vehicle that will determine whether the organization succeeds. A wrong choice here can cost billions of dollars of market capitalization and several executive jobs. When the leader is in place, he or she needs to be given an environment where they can actually succeed. To be maximally effective, the PMO needs to be able to own the portfolio from idea generation through benefits realization. The organization that tries to limit the span of the PMO s role is introducing barriers to portfolio success, and by extension reducing the chances that the organization will achieve its goals. It will take some time to fully implement end-to-end, PMO-driven portfolio management not only because it is a dramatic change, but also because the lifecycle from initial idea to benefit accrual is a long one. The mechanics need to be implemented in their entirety as soon as the PMO can absorb the accountability. Organizationally, this change will actually be one of the easiest to accept because other than increased structure and visibility, the fundamental approaches will remain unchanged we already generate ideas, develop business cases, execute projects and measure benefits. The difficulty with this change is that it impacts senior leaders in the organization. Department heads no longer have complete control over the benefits realization process and can no longer hide missed targets. A new major stakeholder in the project-selection process is going to be driving organization-wide decision making and making it 7

8 harder for individuals to lobby for projects that put department benefits ahead of organization benefits. These are all necessary and positive changes, but that doesn t make them easy. Finally, when it comes to building the right skills, the PMO needs to be repositioned in the organization as a fundamentally different entity. Depending on how the PMO is currently viewed, this may even require a renaming to distance it from any stigmas associated with current underperforming structures. Many organizations can effect short-term changes, but the challenge is to create an environment where those changes can not only survive, but where they can flourish and grow. Regardless of the mechanics of the change, it needs to be consciously driven from the very top of the organization. There can be no doubt that the PMO is the critical success factor in portfolio delivery, and the CEO needs to make that positioning clear and provide consistent, public support for the function. That in turn needs to drive changes into the entire organization, which is the next consideration for implementing this change. Changing the Culture Many organizations can effect short-term changes, but the challenge is to create an environment where those changes can not only survive, but where they can flourish and grow. In this case, the challenge is made more difficult by the fact that the changes go all the way to the very top of the organization. The heads of all departments are being asked to give up control of their projects and hand them over to a new peer. In some cases, they may be losing a department-level PMO in favor of a new enterprise-wide body; and in all cases, they will be exposing themselves to greater scrutiny and accountability. These organizational leaders have a tremendous impact on the way that the changes will be perceived throughout the operating levels of the organization. A few words from a vice president or C-level leader can shape the way that their entire department views the changes and if there is any form of questioning or dissent from those senior levels, the initiative will have very little chance of success. The organization also needs to support this change in their leaders. A VP who is asked to sacrifice some of their own departmental control for the good of the organization is much more likely to buy into the concept if their individual performance measures align with that organization first approach. There needs to be public recognition that the head of a strategic PMO is a senior member of the organization. It s not inappropriate to consider the creation of a CPO (Chief Project Officer or Chief Portfolio Officer) role as a peer to other CXO roles (COO, CIO, etc.). Regardless of the title itself, there needs to be very clear messaging that this role is a peer to department heads. If all department heads are currently Executive Vice Presidents (EVPs) and the PMO head is only a VP, then the credibility is damaged before the changes even have a chance to take hold. Finally, in the cultural area there needs to be a commitment to the long haul in making this change. If an organization fails to achieve its sales targets for any given period, it doesn t disband the sales department. The same needs to hold true for the strategic PMO. Not all PMOs will deliver exceptional 8

9 portfolio performance in year one sometimes because of their own performance, and sometimes because of project execution factors beyond their control. The organization needs to look for improving performance trends and recognize that the changes that the PMO are driving are necessary for long-term growth. They also need to recognize that the PMO model that they moved away from was even less capable of delivering any kind of success. That doesn t mean that the organization shouldn t look to improve things that aren t working, and adjustments will need to be made potentially including changes in leadership if the initial choice is unable to deliver success. That is no different to the situation that happens in any department, and that s the key here the future PMO is a regular business department with accountability for portfolio execution. Conclusions There are many different PMO models, and many of those PMOs are adding degrees of value to project execution. However, in the vast majority of cases, they are not strategically focused organizational departments that have any capability to drive portfolio success. They may well have a role to play in the future of the organization as process centers of excellence, as audit and control functions or in project management support roles, but they aren t the right entity to drive the kind of organizational transformation projects that will become the norm as the rate of change increases and all departments are expected to deliver business benefits. Within the next few years, all organizations will discover that their current PMO model is the wrong one to drive successful project and portfolio execution. The successful ones will recognize those inadequacies now when they can proactively control the way that they improve the situation. The rest will find out when their portfolios fail, they fail to deliver on their goals and objectives, and their competitors leave them behind. Don t be one of those organizations. About ProjectManagement.com Since 2000, our mission has been simple: To make project managers more successful. ProjectManagement.com is the experience bridge that fills in the gaps--providing help to project managers in a number of ways. It is a community, your community, for project managers in Information Technology and other industries. We are your one-stop shop for PM answers, helping you get "unstuck"--and confidently meet every new challenge that comes your way with over 4,000 articles from industry experts, over 1K Deliverable Templates to save you time and more than 550K peer connections and experts to offer specific advice.. About PowerSteering Software PowerSteering combines the robust project and portfolio management (PPM) functionality demanded by global organizations with the cost & speed-to-value benefits of cloud delivery and an unmatched level of flexibility. Easy to use and administer, it enables top-down program & portfolio management without requiring granular task & resource tracking, and provides class-leading analytic and financial tracking capabilities. Leading global organizations, including PepsiCo, Ecolab, Staples, the US Department of Defense, and the UK National Health Service, rely on PowerSteering to accelerate results in IT, New Product Development, Process Excellence and Business PMOs. PowerSteering is part of the Upland 9

10 Software family of cloud-based enterprise work management applications. Visit for more information. About Upland Software, Inc. Upland is a leading provider of cloud-based enterprise work management software. Our family of applications helps transform how work gets done by enabling better alignment of resources with business objectives, real-time visibility, and increased governance and collaboration, resulting in improved productivity and business agility. From strategic planning to work execution, Upland helps more than 1,200 enterprise clients with 300,000 active users in over 50 countries drive results for critical business functions including information technology, marketing, finance, professional services, and process excellence. 10