According to PMSolutions’ “State of the PMO” report, the percentage of organizations with a project management office (PMO) increased from 61 percent in 2007 to 71 percent more recently (2017).
Companies are competing in an ever-revolving door of digital complexity. This creates increased pressure to deliver a higher volume of projects with finite resources, while still growing the business. With the fast-paced digital expansion and constant disruption of technologies, uprooting stable industries and companies need to maintain and grow their market share or die by the sword trying.
Balancing multiple projects is becoming increasingly important, as organizations recognize its value in a competitive landscape, where maximizing resources and hitting timelines can be the difference between sink or swim in this fast-paced climate.
The PMO’s management principles are based on industry-standard methodologies documented in PRINCE2 or guidelines from the PMBOK that focus on planning, organizing, staffing, executing and controlling operations of an organization to ensure maximum output with minimal errors.
But is there a one size fits all project management office? Let’s examine what a PMO does and if your organization should consider this approach in managing projects.
What is a PMO and Why Do You Need One?
The PMO plays a key role in the management of projects from a strategic level. Unlike project management, which focuses on the day-to-day activities within a project team, the PMO acts as a framework for project managers, providing PMO methodologies and templates for managing programs within an organization. It controls the project management resources needed to maintain and deploy projects. It also assists with specific PMO tools such as Smartsheet, Pert, and Gantt charts that will provide guidance and support to other teams on how to manage projects.
Leadership teams within an organization typically have other important work to focus on in running the business and don’t have the capacity or potentially the skills to keep track of all the projects in-play at a high level.
Project managers are busy with their day-to-day activities and their teams, so this abyss is left unmanned, with no one prioritizing from 30,000 feet on how to deliver the many projects an organization needs to accomplish in a fiscal year. Communication is staggered as senior management does not have a solid overall picture of the health of their business at a grassroots level.
Setting best practices for developing programs across an organization. It focuses on procedures by standardizing PMO methodologies needed across departments.
Bridging the gap between senior management, department leads, and project managers to ensure communication and project status updates are streamlined can be a mammoth task in large organizations. Having this PMO function centralized ensures senior management is aware of what projects are at risk and potentially highlight missed opportunities with the intent to put an action plan in place to correct the downward trajectory of the project.
The PMO manages the interdependencies between projects, minimizing resource waste and errors as well as repeatable work that was accomplished already. It leverages off these learnings and gathers the lessons learned, making them available to other project teams to increase further optimization and shorten timelines. It creates synergy amongst project managers ensuring a smoother sail on a project basis.
The PMO trains and mentors project managers as well as team leads, increasing the value of the team’s skill set while also promoting project management best practices within an organization, giving them a voice to steer the project in the right direction.
The PMO is a key player responsible for helping senior management in focusing on which projects need to be eliminated and how to prioritize based on long-term strategic goals.
Different Types of PMOs
Where the PMO fits into your company’s hierarchy structure will depend on what your business wants to achieve across its many projects and the alignment needed to create a unique PMO function to manage specific tasks that must be assigned. Those tasks, in turn, are based on the needs of your organization.
There are different types of PMOs that organizations can consider.
- Enterprise PMO: Ensures that projects align with the organization vision and strategy. Typically enterprise PMOs report to the CEO and have the authority to make strategic and tactical decisions across all projects.
- Divisional PMO: Provides support to projects for a specific line of business within the organization. This includes program management, training, resource planning, and project coordination.
- Project PMO: This is established for the duration of a single project or program. It includes administrative support, controlling, monitoring and reporting.
- Project Management Center of Excellence: Defines project management standards and procedures, methods and tools to support project teams across the organization.
Does Your Organization Need a PMO?
To successfully implement PMO methodologies, companies must remember a few key concepts:
- The role of the PMO must clearly be defined, leaving no ambiguity for responsibility.
- Rather than assigning multiple PMO roles and responsibilities, focus on what the organization needs to accomplish across both short and long-term objectives.
- The commitment of senior management is required for a PMO to be accepted by all parts of the organization. Without this mandate, the PMO department is just another silo fighting to establish its voice in the organization.
Before hiring a PMO, take the time to understand what a project management office is, and how it can benefit the organization in the long-term. From there, implement an action plan that provides clear PMO KPIs to assess the benefits of a PMO.
However, it’s important to keep in mind that not every organization needs a PMO—especially in the initial stages of doing business. As a company matures, this question of whether to bring on a PMO or not becomes increasingly relevant. For larger organizations that have multiple programs operating at the same time, there certainly is a benefit to investing in the PMO framework, with the objective of clearer communication amongst internal stakeholders and the delivery of PMO KPIs. To further understand how company size influences the need for a PMO, let’s take a look at some data:
- 90% of large enterprises have a PMO
- 88% of midsize companies have a PMO
- 61% of small companies have a PMO
Overall, 71% of companies have a PMO and this number has increased by ten in the past decade.
There is a tendency for organizations to start a project management office without assessing the risks and benefits upfront. If a PMO is done poorly, it can set a company back in terms of project delivery but also create negative feelings towards project management, making stakeholders nervous to invest time and money to implement this again at a future date.
According to PMI’s 2017 Pulse of the Profession, companies that align their enterprise-wide PMO structure to senior management strategy had 38% more projects meet original goals than those that did not.
The following benefits to implementing PMO span companies regardless of which sector they operate in:
- Providing a standardized project management methodology and PMO best practices with tangible, long-term benefits to an organization.
- Communication processes become streamlined across programs, allowing increased collaboration among teams.
- Project managers can focus on day-to-day operational tasks. They can provide coaching opportunities to team members, improving skill sets where needed.
- Offering standardized use of project management tools and software makes moving resources between projects simpler.
- Sharing of resources between projects will allow strong teams to prosper.
Assessing a PMO Framework
Project failures are costly. Last year the Project Management Institute (PMI) reported the amount of money lost to failed projects was on average a $97 million for every $1 billion.
The best place to assess an organization’s PMO objectives is to consider how teams work together across multiple systems. Focus on the process of collaboration both within a team and across the organization and assess whether stakeholders have a thorough understanding of how projects run and have visibility into project performance
When teams work in silos, there is a financial cost which may result in a business missing opportunities. Silos hamper growth and efficiency in an organization, which can result in duplication of work produced by different departments as well as demotivated teams, disengaged from driving results and hitting their KPI’s.
The PMO should ensure all teams use consistent project management methodologies and that standardized software is used to manage all projects. Tools and software are great to enable your teams to work efficiently but if not used properly across the organization, it can become a costly business. This can impact the use of the management of tools from security to compliance concerns.
Another consideration is that allowing project teams to use different tools, brings divergent working approaches. This can hinder the reallocation of resources where an organization needs them most, impacting the cost of the project, time to market and bottom line.
Some organizations see senior management so far removed from day to day activities, that they are unaware of the risk impact on projects in-play, resulting in poor delivery time, wasted resources and being over budget.
Organizations strive to be results-oriented, which is critical to their business plans and success. The PMO framework can be a valuable asset in identifying areas for improvement and ensuring the organization is delivering optimal projects on time and within budget.
Measuring up for Success in a PMO?
A survey by KPMG found that nearly 80% of organizations rated their PMOs to be “moderately” to “extremely effective” in supporting change within the organization.
According to a Gartner survey, 70% of organizations that implemented a PMO reported an improvement in project success rates. Measuring the success of a PMO allows senior management to make informed decisions on how best source to adjust a project’s outcome.
An organization must first define and agree on what will be measured to attain PMO success. Set three to five KPIs that are realistic to measure and track them. Here is the list of KPIs you can try measuring:
- The number of projects completed against those that were either abandoned or incomplete. Focus on those projects with PMO involvement against those projects where PMO provided no input.
- Compare estimated project costs against the actual cost to the business. This can be an important business driver and more weight can be placed on this KPI.
- Analyze the return of investment (ROI) on projects coordinated by PMO against those that had no PMO involvement. This can validate the PMO framework. Or it will highlight where changes to the PMO framework are needed.
- Year on year (YoY) analysis on time that has taken to deliver projects of the same size or priority level. Ensure you compare apples to apples to measure this KPI fairly. If not, the output will be ineffective and won’t assist in driving project improvements.
- Calculate whether resources were appropriately allocated for projects. Ensure the right number of resources were available on a project. This PMO KPI will assess the impact of projects being delivered on time.
- Survey the project teams about the PMO process and its impact on their projects. Was it useful having PMO involvement? Did the PMO provide coaching and mentoring that improved the skills of the project teams?
The outcome of measuring PMO should yield improvements to the PMO functions in projects still to come. Assessing PMO KPIs after each project delivery will ensure the growth and sustainability of the PMO.
Conclusion: PMO Is More Relevant Than Ever Before
Even though there have been advances in program delivery using both waterfall and agile methodologies, more thought could be placed around the delivery of projects including deployment and product launches. Think about the end-goal for your projects and some of the challenges you face today. Assessing these pain-points, allows your organization to tailor a better fit to the PMO functions needed in managing projects. It can best serve management and project teams in this complex technological environment.
PMOs are constantly evolving with new technologies, methodologies, and mindsets of project teams. By adapting to your company environment, a PMO can take on a wider range of functions and responsibilities, supporting projects across the business.
The PMO framework of the future will need to be flexible to accommodate program growth and align with an organization’s long-term strategy in a more meaningful way. As organizations are challenged with new technology needs, remote working environments, and increasing project complexity, the benefits of the PMO are more compelling than ever before.
Understanding the basics
The project management office strives to standardize the execution of projects in an organization. PMO objectives can be focused on governance, communication, managing resources, strategic planning, and coaching.
Project management office can help reduce project failures. Last year there was an average of $97 million for every $1 billion failed projects. No business will succeed if its projects are managed inefficiently based on delivery time, resources and budget. This is where PMO can help best.
PMO benefits help streamline communication across all projects with internal stakeholders, including management. PMO provides coaching that allows for opportunities to improve skill sets where needed. PMO allows resources to be invested where an organization needs them the most.
The purpose of a PMO depends on the needs of an organization it serves. The PMO function must define the standardized processes that govern project management including the tools used to manage projects.
PMO provides governance over managing projects across an organization. PMO bridges the gap between senior management, and other teams to improve project communication. PMO manages interdependencies between projects and can be helpful in coaching project managers and team leads, promoting improved skill sets.