why is a pmo valuable to your organization

IIL's Webinar Learning Series

1IIL-Webinar © 2009 International Institute for Learning, Inc.

Participant’s Notes:

Version 5.0© 2009 International Institute for Learning, Inc.

WWW.IIL.COMIIL-Webinar

ByDr. Harold Kerzner

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Why is a PMO valuable toyour organization?




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Governance Issues

Poor alignment between projectobjectives and broader business goals

Poor business case developmentresulting in the go-ahead of projectsthat provide limited or no value

Badly specified project outcomesmeasured in real business terms




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Benchmarking

“Benchmarking and ongoing monitoring are partof the success metrics required for optimizationof project processes. Customer-defined measures,such as project order responsiveness, etc., arebenchmarked against industry standards (bestand average). …. Implementation of the standardproject process will enable the implementationthis business unit’s ‘best practice’ into thestandard project process for enterprise-wideimprovements.”

(Bill Marshall, Formerly Director, Nortel Networks)




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Benchmarking

“In 1996, we began looking at ourbusiness from the viewpoint of itscore processes…… As you mightexpect, project management madethe short list as one of the vital, coreprocesses to which quality principlesneeded to be applied.”

(Martin O’Sullivan, Vice President, Motorola)




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Process Champion

“Benchmarking resulted in ourGroup assigning a process championand process action team to projectmanagement.”

(Martin O’Sullivan, Vice President, Motorola)






Growth at American Greetings

According to Jeff Weiss, President and ChiefOperating Officer:

The program management office provides thestructure and discipline to complete the work

that needs to get done. From launch tocompletion, each project has a roadmap for

meeting the objectives that were set.






Growth at American Greetings

According to Zev Weiss, Chief Executive Officer:

Through project management, we’ve learnedhow to make fact-based decisions. Too often in

the past we based our decisions on what wethought could happen or what we hoped wouldhappen. Now we can look at the facts, interpret

the facts honestly and make sound decisions andset realistic goals based on this information.




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Activities for a PMO

Strategic planning forproject management

Benchmarking

Cost reduction andcontinuousimprovements

Mentorship

Lessons learned files

Problem-solving hotline

Templates

Career path

Education and training

Assessing risks

Disaster recovery plans

Customer relationsmanagement

Portfolio management

Capacity planning

PMIS

Guardian of projectmanagement intellectualproperty




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Project Office versus COE

Permanent line functionfor project managers

Focuses on internallessons learned activities

May be a formal orinformal committee (maybe part-time)

Focuses on externalbenchmarking activities

Center of ExcellenceProject Office




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Project Office versus COE

Champion for theimplementation of themethodology (driving itfrom the top down)

Expertise in the use of theproject management tools

Champion for continuousimprovement activitiesand mainly externalbenchmarking

Expertise in theidentification of projectmanagement tools

Center of ExcellenceProject Office




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PMO Implementation Risks




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The Project Office (COE)

Companies are now struggling withthe organizational reporting locationfor the Project Office/COE.




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The PMO’s Charter

Is the charter for the PMO to managethe present or to focus on the future?




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PMO’s mission, goals and guiding principles

Out-of-the-box thinkingBig, hairy, audacious goalsFact-based decision making

TeamworkOpen and direct communicationResults orientation

Guiding Principles

Text Text

Goals2. Project

ManagementDevelop and

institutionalize programmanagement processes

and tools

3. ChangeChampion

Champion and enablechange

1. OpportunityIdentification

Facilitateidentification of

opportunities to growrevenue, reduce costsand optimize assets

MissionDrive continuous improvementthrough successfully managedprojects delivering bottom-line

results




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Value-Added Activities for the PMO

The project manager focuses heavilyupon customer value-added activities,whether it be an internal or externalcustomer.

The PMO focuses on corporate value-added activities.




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Ways for a PMO to Fail

Focusing on profitability or costreduction of a single project

Not understanding the cost ofpaperwork




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PMO Questions

Is the PMO overhead or a direct laborcharge?

Can we measure the return oninvestment of a PMO?




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Measuring the ROI on a PMO

Tangible measurements include: CSF: Customer satisfaction KPI: Projects at risk KPI: Projects in trouble KPI: The number of red lights that need recovery, and

by how much added effort Throughput of work year over year

Intangible elements may also exist and thesemay not be able to be measured Early-on identification of problems Quality and timing of information




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More Critical PMO Evaluation Questions

Is the PMO becoming more productiveyear-over-year?

If so, is it causing the rest of theorganization to become more productiveas well?

Are we convinced that we are workingon the right projects?




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Types of Project Offices

Functional Project Office: resourcemanagement

Customer Group Project Office: customermanagement

Corporate Project Office: strategic andoperational issues




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Benefits of a Project Office[for the executive levels of management] (1 of 2)

Standardization of operations

Company rather than silo decisions

Better guidance on resource allocations (i.e.effective capacity planning)

Access to and quality of information reportingsystems

Effective project prioritization process

Company efficiency and effectiveness




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Benefits of a Project Office (2 of 2)

Elimination of silos

Less need for restructuring

Fewer meetings (i.e. better time management)

Development of future general managers

Retention of quality resources

Horizontal career path and horizontal decisions




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Project Office Risks

Excessive headcount

Potential burnout of talented people

Using the wrong people as leads

Reliance on excessive paperwork

Going “to the well” too often

Focusing on job descriptions rather thancompetencies

Unnecessary restructuring for control of theproject managers/project office




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When to Involve the PMO

Threshold: Dollar value of the project Duration of the project Risks to the company Criticality of the project (i.e. cost

reductions) Amount of cross-functionality




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Project Office Growth

According to Jim Triompo, Group SeniorVice President at ABB:

“The project office does not deliver projects.The projects managed by the projectmanagement office are limited to process/tools development, implementation andtraining. The project management office issometimes requested to perform reviews,participate in division level risk reviews andoperational reviews in various countries.”




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CEOAmericas

Senior DirectorSolution Design

EPM

PMO Mexico PMO Brazil PMO UK/Europe PMO Asia

CEOAmericas

Senior DirectorSolution Design

EPM

PMO Mexico PMO Brazil PMO UK/Europe PMO Asia

Exel’s Networking PMOs




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Master vs. Regional PMOs (EXEL)

Activities for the regional PMOs include: Promoting use of the methodology Promoting use of the tools Project execution and delivery Subject matter expertise (which may

support the Master PMO)




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Star Alliance

How does an organization coordinate theefforts of fifteen or more regional PMOs that,when combined, carry annually 405.7 millionpassengers to 975 airports in 162 countries?




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Star Alliance Membership

Air Canada

Air China

Air New Zealand

All Nippon Airways

Austrian Airlines

bmi british midland

Egypt Air

Lufthansa

Turkish Air

Scandinavian Airlines(SAS)

Swiss Air

Shanghai Airlines

Tap Portugal

Singapore Airlines

United Airlines

Asiana Airlines

South African Airways

Spanair

LOT Polish Airlines

Thai Airways Int.

Other airlines? Air India Brussels Airlines Continental TAM




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Star Alliance

The projects carried out for the businessunits include such topics as informationtechnology, marketing, sales, products,services and frequent flier programs.




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More Critical Questions




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PMO Skills

Are all people (PMP®s) qualified to workin a PMO?

What skills are important?

Will the required skills change if thePMO is involved in multinationalactivities, or with networking PMOs?




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Questions Involving P&L Responsibility

Are there risks in assigning a PMO P&Lresponsibility?What if the PMO is now identified withP&L rather than the line organization?Will the line organization “surrender”P&L responsibility easily?Will the line organization allow theirbest project managers to be transferredto the PMO, either permanently ortemporarily?




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Questions on PMO Governance

How should a PMO handle complianceaudits?

If poor compliance is discovered, is thePMO authorized to enforce correctiveaction?




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Questions on PMO Toolkits

What is a PMO toolkit?

Are there different tools based upon thetype of PMO?




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Project Selection

What projects should wework on now?




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PMO Involvement in Projects

BREAKTHROUGH

PLATFORMS

MAINTENANCE

PROJECTS

PMO INVOLVEMENTHIGH

HIGH

LOWLOW

TEC

HN

OLO

GY

/ RIS

KS

ENHANCEMENTS




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Strategic PMO Issues

Determining the staffing tolerance forprojects

Analyses of the number of changerequests

Validate funding, schedules anddeliverables on existing projects

Bringing some projects to closure at aquicker rate




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View from the Top (EDS)

Most organizations have a PMO establishedand this was generated from the view thattheir individual projects required oversight.This is a significant jump for manyorganizations that ten years ago did not seevalue in project managers and are now fundinga PMO. But most of them are paying the priceto staff the PMO, but still do not see the value;they see it as a necessary evil. In other words,things would probably be worse if we did notstaff the PMO.




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According to Ron Kempf, Director PMCompetency & Certification, HP ServicesEngagement PMO at Hewlett-Packard:

“For large, global companies the need forproject management standardization andsupport is essential. To solve this problem,companies have developed a network ofglobal project management offices allcoordinated from a single source. At Hewlett-Packard, this network is referred to as the HPServices Project Management Office.”




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According to Ron Kempf, Director PMCompetency & Certification, HP ServicesEngagement PMO at Hewlett-Packard:

“HP Services PMO structure supports morethan 8000 project managers in 160 countrieswith regional offices located in Americas, AsiaPacific, Europe, Middle East, Africa, and Japan.Three focus areas are – health of the portfolio,project management development, andprocesses.”

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Question

Consideration PMO Tool/Process

Objective strategic fit analysis

Effective project prioritization

Consolidated resource planning

Rigorous benefits tracking

Accurate portfolio reporting

Common tools and processes forprojects (e.g., standard statusreporting, issue & risk management,etc.)

Are projects aligned with strategicgoals? (e.g., shareholder value,customer satisfaction, etc.)

Are resources deployed againstprojects with the highest strategicvalue?

Given our strategic objective, will wemeet our strategic goals? (e.g., SVA= $100M improvement)

Will we hit current fiscal year targetsor should we manage expectations ofstakeholders?

What are the necessary capabilitiesto effectively manage the technologyportfolio (e.g., benefit realization)?

Are we (Company,IT) doing the rightthings?

Are we doingenough of the rightthings?

Are we doing theright things right?

The PMO provides an enterprise-wide approach to identify, prioritize andsuccessfully execute a portfolio of IT initiatives, aligned with the businessunits’ strategic objectives.

PMO Mission

What is the PMO - its mission

• The PMO assists in defining a standard Project Management methodology to use with ITprojects. It supports the consistent application of this methodology to all IT projects.

• The PMO evaluates IT projects against strategic plan regardless of the owner (responsiblebusiness unit).

• The PMO assures that only the projects with the most value are allocated resources.

• PMO processes and tools complement and support standard FE IT Project Managementprocesses.

Why does it exist - the business need for the PMO

• Ensures that only highest value projects are completed.

• Optimizes resource allocation.

PMO “Guiding Principles”

• Complements traditional project management.

• Complements the merger benefits tracking process.

• Authorized to manage, allocate, and ensure availability of resources.

• Manages project interdependencies.

• Measures project performance.


1-‹#›IIL-Webinar © 2004 International Institute for Learning, Inc.




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Projectinitiation

Projectscoping &planning

Projectdelivery

Resources (dollars &FTEs) go to projectswith strategic value

Standard statusreporting

Monitor/Documentbenefits realization

Standard opportunityform to captureprojects

Standard business caserigor

Link to strategicobjectives

PMO evaluates projects

Prioritize basedestablished criteriatied to strategic goals& KPIs

Formalized detailedproject planning

PMO prioritizes projects PMO monitors delivery

P

M

O

PMO and Project Life Cycle

In the Initiation phase of a project, the PMOevaluates projects.

• Should further analysis be done (develop aBusiness Case)?

• Should IT resources be allocated forplanning?

In the Planning phase of a project, the PMOprioritizes projects

• Should IT resources be allocated fordevelopment & delivery?

• Integrate the project into the MasterSchedule (the IT project portfolio).

In the Delivery phase of a project, the PMOmonitors across projects.

• Identify impacts on Master Schedule andtake action.

• Track benefits realizations after projectcompletion.




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Ideas are generatedthroughout the entireorganization…

Evaluate projects

•Opportunity options

•Resource requirements

•Refined project costs

•Refined savings

•Benefits (financial,strategic, payback)

•Project metrics

•Benefits realization

•Risks

•Exit strategies

•Refined people, process,technology impacts

•Schedule/milestones

•Complexity

•Standard technology?

BusinessCase

…then evaluated using astandard business case…

NON-VALUE ADDEDBUSINESS CASES

…non-value added opportunities & projectsare eliminated…

Filt

erThe PMO evaluates projects

• Ideas are generated.

• Captured using an Opportunity Form.

• Determine if resources should beallocated to evaluate further.

• Develop a Business Case.

• Determine if resources should beallocated for project planning.




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Business

CaseBusiness

CaseBusiness

Case

Business

Case . . . are be evaluated relative totheir strategic impact. . .

Understand Strategic Goals

Financial (SVA,EPS)

Customer (Index)

Operational(Index) Employee Development

(Index)

UnderstandProject Complexity

Relationship w/other projects

Technical complexity

Risk

. . . to prioritize initiativesand allocate resources. . .

Understandresource availability

. . . resulting in a MasterProgram Plan.

Prioritize

All Business Cases . . .

ProgramsStrategic

Value Expense

Cost

Cumulative Expense

Cost Capital

Cost Cumulative Capital Cost

Resource Reqmt

Cumulative Resource

ReqmtPowerOn Remote 147 10$ 10$ 10$ 10$ 2 2

Website for Vendors 100 8$ 18$ 23$ 33$ 0.5 2.5

B2B Pantellos 86 13$ 31$ 4$ 37$ 2 4.5

SAP for IT 70 4$ 35$ 2$ 39$ 2 6.5

Energy 2000 Reorg 90 6$ 41$ 45$ 84$ 0.5 7

Dereg Bill Ready 71 4$ 45$ 32$ 116$ 2 9

SAP 4.6 Upgrade 55 28

Disaster Recovery 44 3$ 48$ 23$ 139$ 7 16

CCS Test data 26 87$ 135$ 3$ 142$ 2 18

MVS - Retire unused applications55 2$ 137$ 23$ 165$ 1 19

Multi-Function Devices 20 7.5

Ethernet Back bone 10 12$ 149$ 231$ 396$ 0.5 19.5

Upgrade to Windows 2000 Server10 3$ 152$ 3$ 399$ 1 20.5

Lotus R5 Rollout 10 1$ 153$ 4$ 403$ 0.5 21

Resource Driven Cut-Off

Capital Driven Cut-Off

Expense Driven Cut-Off

Illustr

ative

Illustr

ative

ProgramsStrategic

Value Expense

Cost

Cumulative Expense

Cost Capital

Cost Cumulative Capital Cost

Resource Reqmt

Cumulative Resource

ReqmtPowerOn Remote 147 10$ 10$ 10$ 10$ 2 2

Website for Vendors 100 8$ 18$ 23$ 33$ 0.5 2.5

B2B Pantellos 86 13$ 31$ 4$ 37$ 2 4.5

SAP for IT 70 4$ 35$ 2$ 39$ 2 6.5

Energy 2000 Reorg 90 6$ 41$ 45$ 84$ 0.5 7

Dereg Bill Ready 71 4$ 45$ 32$ 116$ 2 9

SAP 4.6 Upgrade 55 28

Disaster Recovery 44 3$ 48$ 23$ 139$ 7 16

CCS Test data 26 87$ 135$ 3$ 142$ 2 18

MVS - Retire unused applications55 2$ 137$ 23$ 165$ 1 19

Multi-Function Devices 20 7.5

Ethernet Back bone 10 12$ 149$ 231$ 396$ 0.5 19.5

Upgrade to Windows 2000 Server10 3$ 152$ 3$ 399$ 1 20.5

Lotus R5 Rollout 10 1$ 153$ 4$ 403$ 0.5 21

Resource Driven Cut-Off

Capital Driven Cut-Off

Expense Driven Cut-Off

Illustr

ative

Illust

rativ

e

The PMO prioritizes projects

• Project plans are developed for BusinessCases.

• Project plans are are prioritized relativeto their strategic impact.

• Resources are allocated for execution.

• Projects become part of the MasterProgram Plan.




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Project Plan

Each project will be delivered using defined standardsoutlined in the PMO Guide and project management bestpractices.

BenefitsTracking

PMO Database

StatusReporting

Issues/Risks

ChangeControl

ResourceAllocation

Master Program Plan

Monitordelivery

Scoping and Planning Project Delivery

The PMO monitors projects

• Status reporting.

• Managing issues and risks.

• Change control.

• Resources use is monitored.

• Tracking the benefits.




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Project Manager Identification

Attitude Hard Skills

PM

Soft Skills

• Leadership• Judgment• Flexibility• Sound business knowledge• Credibility• Communications• Team building

• Define project • Solve problems • Project management • Business knowledge• Technical understanding

• Independent• Accountable• Willing to work

within process




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PMO Process:Projects Portfolio Reductions

($ millions)

StartingPortfolio

PMO ProcessReductions

FinalPortfolio

$240M

$160M

Reductions$80M or 35%

Financial Corporate Safety Customer Service Excellence Operational Performance Employee Development

Reductions based onBusiness Case criterion:

$80M




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why is a pmo valuable to your organization

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