Whitepaper: Executing Strategy Successfully

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1 Various studies done in the past 25 years indicate that 60% to 80% of companies fall short of the success predicted from their new strategy. Kaplan & Norton, Harvard Business Review (Jan 2008) Whether you have already developed an inspiring new strategy for your organisation, or need to adjust your existing strategies due to the troubled economic climate, the critical factor for success is not simply the strategy, but the execution of that strategy. Business strategy implementation usually relies on the execution of projects that implement the change in the business, and introduce new processes and systems that will support them. However, recent studies show that there are still as many as 40% of projects that fail to deliver as promised. The seemingly effortless propensity of projects to run over-time, over-budget, and not deliver the benefits they promise is one of executive management s biggest headaches, and an obvious contributor to the downfall in execution of strategy. Clearly, this formula demonstrates that a focus on the execution of projects is as important if not more so than the strategy itself. January

2 how do i up the ante on project execution? Good project management is the key to improving upon project execution (with a flow on to organisational improvement) and it is not something that just happens. It has to be fostered and developed in just the same way as other key business functions, with principles built around lessons learned, delivering the business benefit of working smarter. A survey of senior practitioners with knowledge of their organisations business results and project management practices showed that improvements in organisational performance correlated to the implementation of project management improvement initiatives. These initiatives included: Implementing a project office, a project management methodology, and/or project management software Integrating project management into key company processes Training staff in project management tools and techniques Deploying a development program for project staff In 2006, Gartner published the results of a study relating to the potential payback of increasing project management capability. Utilising a maturity model (P3M3) to define and standardise the capability levels, the research showed that as project management capability rose through the levels, there was an increase in project productivity and a reduction in project costs that directly correlated. 2

3 Most organisations perform multiple project management improvement initiatives, and the best way to strategically co-ordinate the execution of these initiatives is via a Project Management Office. Establishing a Project Management Office is often the first step companies take to improving organisational, departmental or individual project management execution. During this establishment period, the organisation often assigns the PMO several objectives: Centralising the coordination of project delivery improvement efforts Providing consistent project management tools and approaches Giving project managers a forum to discuss issues and share best practices Providing the opportunity to request coaching or mentoring for managers running varied and complex initiatives case study: the benefits of the PMO in practice The results gained by the Australian division of a worldwide pharmaceutical company evidence the numerous benefi ts gained by implementing a strategic PMO. They established an Enterprisewide PMO to increase their project management profi ciency, maturity, and to ensure their projects contributed to organisational success. Following the incorporation of the PMO, the division: Increased visibility, control and return on discretionary spend: In 2007, the discontinuation of non-strategic projects and reductions in project cost overruns enabled phenomenal fi nancial control with a multi-million dollar saving. In 2008 and beyond, individual projects expect greatly increased benefi ts due to effective and effi cient project execution. Increased decision-making capabilities by aligning projects with company strategy Improved cross-functional collaboration Facilitated major organisational cultural change Increased employee satisfaction through accurate resource estimation and deployment Managed results-driven increase in project management maturity and project execution January

4 However, it is vital to remember that incorporating a PMO into your organisation is just the start of a journey whilst setting up a PMO is an excellent beginning, it is only one part of the project execution and organisational performance improvement mission. Unfortunately, after the initial establishment, many organisations don t: Measure how their PMO is helping to service their customers Review how the PMO is ensuring the execution of organisational strategies Expand the use of their PMO beyond the implementation and upkeep of methodologies and toolsets While the PMO has most certainly already contributed substantial value to the organisation, stopping at this point in the journey can fail to demonstrate an ongoing return on investment for the business. Furthermore, if the PMO stays at this level and is not managed well, it may often lose focus on strategically improving project execution and organisational performance. PMOs can sometimes become distracted by an overemphasised focus on documentation and reporting. If this occurs, executive management will lose interest, and in this market the PMO can become a target for headcount reductions or could even be closed down all together as a cost containment measure. The purpose of Project Management is to bring about change in an organisation. Likewise, the purpose of a PMO is to provide a centralised body of independent experts to facilitate the initiation, planning, and execution of change, and to provide visibility and progress reporting back to the business to enable management decision-making. Executed correctly, the PMO is a powerful mechanism to help you achieve your change in strategy and ensure that you meet your business goals. 4

5 getting the most value out of your PMO Boards expect executive management to establish the strategic direction of an organisation. Executive management empowers middle management to implement the strategic plans. Middle management launches programs and projects to establish, ready or change the business to deliver the increased revenue or improved productivity that the strategy outlined. In the organisation below, the PMO provides the methodology, toolsets and coaching to help with the execution of these projects. But who is tasked with ensuring the organisation derives the right return on investment across the total portfolio of programs and projects? It is vital that every organisation ask themselves the following: Who s making sure that the projects conducted are the right projects? Who is making sure that multiple middle managers are not conducting the same projects? Who s making sure that similar projects in department silos are able to leverage off each other? Who is taking an unbiased and independent view of the total portfolio of projects, and tracking their ability to deliver the benefits promised? January

6 To get the most value out of your PMO, it is best to utilise it to manage your entire portfolio of projects with the overriding aim of achieving your strategy. Your PMO should not only run individual projects but have the visibility to oversee the business s projects as a whole. The PMO should: help you justify, select, prioritise and resource the projects you need to run to realise your strategy provide ongoing focus, monitoring, measurement and reporting on how each project is tracking against the target they need to contribute to the realisation of your strategy analyse the root cause(s) of any underperforming projects and provide assistance to improve performance or facilitate the decision to stop them altogether Some organisations call this Portfolio Management, some call it Value Delivery Management, but regardless of what you call it, if you properly empower your PMO you will substantially increase your chances of successfully implementing your strategy in the most cost-effective way, whilst increasing management efficiency. conclusion In these difficult times, your organisation s performance will be reliant on your ability to successfully execute new strategies. Focusing on improving your project execution will be a critical factor in enabling you to achieve your goals. Establishing a strategic PMO or improving the strategic alignment of your existing PMO by moving beyond methodologies and focusing on portfolio management, will ensure that the projects you are undertaking contribute to your strategy, effect change, and utilise your important resources effectively and efficiently. To discuss how Adaptra can help you establish or improve your PMO, or provide you with an experienced PMO leader or resources that can increase your performance capability, please contact us on or our solutions team at [email protected]. 6