Chapter 11a Project Management Office and Project Governance Dave Ludwick
The Project Management Office The PMO is an organization within a company which is responsible for the management of the project management process and function. Historically, the PMO has not had a great reputation 50% of PMOs fail the first time around Gartner, Itxpo PM Solutions, The State of the PMO 2010 Report. The PMO is seen as a controlling organization which offers little value to the bottom line In fact it is often seen as a cost centre rather than a benefit Yet, as we saw in Chapter 2, PMOs have been linked to the success of projects
PMO Success PMOs have contributed to (as reported in August 2011 edition of PM Network magazine): 31% reduction in project failures 30% of projects being delivered under budget 21% improvement in productivity 19% of projects being delivered ahead of schedule 17% cost savings per project 13% increase in resource capacity Pretty impressive
What do PMOs do?: The PMO establish project management processes within the company establish documentation standards and templates standardize how projects are carried out provide a controlling function to ensure projects meet expectations ensure project managers have the needed skills to carry out projects They form or provide logistical support for project governance
Why have PMOs failed? There are a few factors behind PMO failure They are seen as a cost and so executive leaders have often not invested to the extent that they could have The PMO hasn t had an effective champion One who knows the technical aspects of the product, service, etc, but who also has the project management function nailed too. PMOs haven t been able to shift their focus when executive needs and values changed
How can PMOs be successful? PMOs need to be able to illustrate value before executives and other stakeholders will seem them as valuable One way to do this is to take a benefits and outcomes approach That is, the PMO leader needs to be able to articulate what the benefits of the PMO are and then be able to illustrate that in terms of measureable outcomes
Benefits of PMO So what are the benefits of a PMO then? PMOs establish project management as a legitimate function/service within the organization PMOs protect the values of project management Scope, schedule budget They establish project management policies and procedures They standardize by using templates and processes Standardization leads to predictability which leads to quality of project management They can conduct milestone reviews for projects They can support the training and development of new project managers Most importantly, they can ensure proper risk management, scope management, change management and schedule management is followed
Costs of a PMO The obvious costs are human resource costs Costs of Salaries Infrastructure PMIS Some companies still see PMs as unnecessary overhead and bureaucracy So they would see a PMO as even more of this
Measurable Outcomes Before defining outcomes, it is important to understand what leadership currently values as important for the company Its equally important to remember that these values will change There are several measurable outcomes that PMOs can track that would help illustrate the business case for further investment in the PMO Tracking project portfolio return on investment Tracking earned value (more in Chapter 12) Tracking projects against budget, schedule, scope Reporting completed projects
PMO s unique position A well staffed and led PMO is in a unique position to control company investment in projects The best way to ensure the highest profitability of projects is through the project selection process More later in Chapter E When going through the selection process, PMOs need to consider soft factors beyond ROI, risks, benefits and costs
PMO dos and don ts Do: Remember the project level That is, when setting up all those processes, procedures, templates, etc, remember that the project managers on the front lines need to be able to use them Don t: Manage the PMO like a project A PMO is a liaison between upper management and project teams. PMOs don t write status reports or manage the projects themselves Do: Exude confidence Don t be intimidated. Instead, make sure that all risks have been considered and appropriate risk mitigation approaches are taken Don t: Get bogged down Don t make the PMO a bureaucratic organization that slows itself, its projects and the company down
PMO s unique position Three critical questions the PMO should ask: Does the organization have the time, money, resources, and motivation to undertake the project? And will it last? Is the project on track to deliver the benefits that prompted its selection in the first place? Did the project lead to profitability? Summary The PMO is a cost and so it needs to offer its own benefits (beyond those of the projects themselves) The PMO is in a unique position to control, but it can t be seen as controlling.
Project Governance Project Governance The management or organizational framework in which project decisions are made The project organizational chart describes the hierarchy of decision makers for the project The project org chart may be different from the corporate organizational chart Project governance focuses on Project portfolio strategy Project sponsorship (and financing) Project and program management Disclosure and reporting
Project Governance Governance is really all about decision making At the highest level (corporate executive level), a governance structure facilitates project decision making to eliminate project failure: Doing the right projects good project selection, good project prioritization alignment of projects with the corporate strategy Doing the projects right Project and program management processes to deliver projects that meet expectations (quality) Delivering the intended scope, budget/cost, timeline/schedule while managing risk
Pillars of Project Governance There are 3 pillars on which governance is based: Structure refers to the governance committee structure. Includes a Project Steering Committee or Change Advisory Board May include various stakeholder groups and perhaps user groups. There may be a Program Board, governing a group of related projects of which this is one, and possibly some form of portfolio decision making group. The decision rights of all these committees and how they relate must be laid down in policy and procedural documentation.
Pillars of Project Governance People Governance membership is determined by the nature of the project, the decision making that will be required and the skills and experience needed to make those decisions Information Decision makers need information to add context to decisions regular reports (status reports and other communication tools), issues lists risks matrices Scope, schedule, budget Measurement tools to assess progress
Pillars of Project Governance A large part of project governance is making decisions as they come up Project governance can also be used to assure that the project is going to be successful Project governance reviews projects at 3 levels of formality Audit: Most formal type of review Most expensive type of review carried out by certified auditors from external organizations. usually followed when the project places high financial amounts at stake or projects of public interest the audit is planned as part of the project planning, implementation and control phase.
Pillars of Project Governance Formal Review: Less rigorous than the audit, Formal review is the most common type of assessment. Carried out by senior project managers from the same company but not necessarily from the same part of the company. Projects are selected for review mainly because of low performance. The review process focuses primarily on project management; Medium level cost of the review Health Check: the most informal type of project management review. Success of this type of review depends on the honesty and professionalism of the project manager this review type is not very credible unless the project manager is well known and held in high esteem by the company. But the cost of the review is low