9 deadly sins every pmo should avoid omni red paper - may 2012

An Approach for IT Organizations

9 Deadly Sins Every PMO Should Avoid The OMNI Consulting Group

May 2012

IT Executive Series 2

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Table of Contents Executive Summary ........................................................................................................... 4 Introduction ........................................................................................................................ 5 9 Deadly Sins Every PMO Should Avoid ............................................................................. 6 4 Steps To Accelerate Your PMO Success ........................................................................ 9 Conclusion ....................................................................................................................... 12 Recommended Reference Materials ................................................................................ 12 About the Author ............................................................................................................. 13


Executive Summary

According to an article published by Lisa Sapi, CIO of Global Knowledge – “The failure rate of large information technology projects is legend. Survey results illustrate that about 50% of all projects do not meet original budget or schedule estimates and are missing critical scope elements, while an additional 25% are abandoned, never reaching completion at all. Yet, according to Gartner, world-class organizations enjoy an IT project success rate closer to 90%. What is it they know about delivering business value through project management that nearly triples their success rate? Most of them have established successful Project Management Offices (PMOs). In fact, two-thirds of organizations implementing PMOs report that project success rates have improved significantly as a result.”

Implementing a PMO is a project in itself, subject to some of the pitfalls that we will be discussing. Our intent in this paper is to examine nine deadly sins every PMO should avoid and also provide four simple steps that can increase your chances of success when implementing a PMO.


Introduction

It is an undeniable fact that PMOs have had huge impacts and have contributed significantly to the successful delivery of critical business and IT projects in many organizations.

According to a recent Forrester study, “Organizations committed to project management excellence in the form of repeatable processes, useful tools, and organizational support have found that meeting critical objectives is well within their capabilities — in large part because their PMOs have provided critical support. But this applies to only the 34% of IT investments that makes up new development (versus the 66% that make up operations and maintenance). In today’s challenging environment, applying a PMO’s discipline and enabling visibility into only a one-third of total IT spending isn’t enough.” Today most PMOs are missing the boat because they are, in one way or another, attempting to justify their relevance and demonstrated value; these offices too often soon realize their untimely demise.

Consequently, many PMOs today have come under immense pressure to create and drive business value through transformation and effective project management processes. As the result of these huge expectations, these well-intended PMO leaders have resulted to practices that we will consider the “9 deadly sins” every PMO should avoid if they want to remain significant and relevant to their respective organizations.


9 Deadly Sins Every PMO Should Avoid

Having worked with many leading companies in helping to analyze, define, plan, and implement PMO strategies and frameworks, consultants at the OMNI Consulting Group have seen that most organizations today demand greater visibility into IT spending and value. Companies realize that the disciplines that apply to project portfolio management can also help them utilize resources more effectively and drive overall business performance, productivity, and profit margins.

Based on our experience and research we have uncovered that most IT PMOs, in their exuberance to remain viable to their organizations, are implementing tactics that are counter-productive to their original intent. These tactics are what is called the 9 deadly sins every PMO should avoid. These sins are listed as follows:

è PMO is not connected to the overall company strategy.

è PMO is a “Process Tyrant.”

è PMO has no core methodology and framework.

è PMO attempts to solve “world hunger.”

è PMO lacks transparency and visibility.

è PMO is gathering and reporting unnecessary information.

è PMO is seen as a cost center.

è PMO lacks executive champion.

è PMO lacks infrastructure for communication.

1. PMO is not connected to the overall company strategy.

It is quite common to find IT PMOs that are totally disconnected from their company’s key strategic goals. In most instances, IT PMOs were created out of a crisis management mentality as a means to address or avert a major project from catastrophic failure. Consequently, there is a lack of strategic cohesion between the business and IT. For the most part, these PMOs continue to function under the charter or mandate that they inherited from the start. Thus, it is not uncommon to have PMOs strategies that are in no way aligned with that of the business. This renders many PMOs irrelevant, thus making them perfect candidates for the executive “chopping block” as the business is pressured to cut cost. Irrespective of the many successes that the PMO may have garnered, due to this disconnect they are perceived as not impacting their company’s bottom-line contributions.


2. PMO is a “Process Tyrant.”

The surest way to make a PMO irrelevant is to assume the role of a process and methodology tyrant. In today’s business climate where project managers, like other business resources, are being asked to step up to the plate and do more with less, there is nothing more depressing than to have the PMO “torturing” you with the fact that you need to follow the process. As a strong process-driven consulting firm, we are in no way saying that PMO processes should be ignored. At best, this will lead to complaints from the project managers, and at worst, it can lead open revolt and total abandonment of the process. Instead of being support and a guide to the project managers that creates value and consistency for project management delivery and best practices, the PMO will fast become a foe. The impact will be devastating since the PMO will lose visibility into its project portfolio due to lack of support from the project managers.

3. PMO has no core methodology and framework.

It is often funny when you walk into an organization and ask the PMO leader, “What is your PMO methodology?” About 75% of the time their response is usually the “deer in the headlight stare.” Yes, it is imperative that every PMO should have a methodology and framework to govern its activities. Without a methodology it is impossible for the PMO to effectively measure project performance base on size, scope, cost, etc., thus impacting the overall health of their project portfolio. In addition, a methodology is required to ensure consistency for project execution and minimize risks stemming from inexperienced project managers. To this end, we strongly recommend that PMOs have a clearly defined methodology and framework that they use as the basis for operating their PMOs.

4. PMO attempts to solve “world hunger.”

Cogitating on the many recent successes PMOs have enjoyed in helping organizations accelerate and improve project performance, there is the emerging confidence that a PMO can solve all of their company’s problems. As enthusiastic supporters of PMOs, we’d like this to be true, but in all honesty this is usually an unfair assumption. Although it is undeniable that PMOs can drive overall project delivery success, from our research it has been revealed that this is often a difficult task to accomplish since there is no clear mandate as to how they are suppose measure the company’s performance with regards to all of the functional areas. To successfully make this doable, forward thinking companies are creating next generation PMOs called Enterprise PMOs (EPMO). These EPMOs have the mandate to drive company-wide projects that have direct impact on strategic business objectives. This approach has ensured that functional PMOs are not attempting to solve the world hunger problem.


5. PMO lacks transparency and visibility.

In today’s economy, CIOs are being asked to demonstrate greater value, and the lack of information around maintenance and support forces IT management into a contentious relationship with business partners. When business and IT cannot communicate about investment and value, the business starts looking elsewhere. For example, it may decide to investigate software-as-a-service providers as low-risk alternatives for specific business solutions. With that said, IT PMOs are being asked to create an environment that supports greater transparency and visibility into their project portfolio activities. This can be addressed through better reporting and PMO status dashboards.

6. PMO is gathering and reporting unnecessary information.

Most PMOs are great at gathering all sorts of metrics and statistics on how well their projects within the portfolios are performing. The question that seems to be ignored is, “How relevant is the data/metrics that are being gathered?” If that information is not used in the decision-making process, why gather it? It just creates an extra burden on the project team without generating any useful results. An example is gathering time data at the detail task level, including sub-tasks like “staff meetings, team meetings, etc.” These may be useful reminders as tasks, but for planning purposes all we really need to know is how much time each resource is spending performing administrative tasks.

7. PMO is seen as a cost center.

As stated earlier, project success is more common with a PMO in place. But because PMOs are not seen as direct contributors to revenue generation, they are often under duress to continually prove their value. If an organization doesn’t make value realization a regular part of its process, keeping the PMO in existence is difficult to justify long term. Low-performing PMOs tend to last only approximately 3.5 years. In order to stay relevant as a major value creator within companies, PMOs should track and demonstrate their benefit as an enhancing and contributing asset to the company’s revenue.

8. PMO lacks executive champion.

For PMOs, like most business process innovation methodologies, the need for having a not only strong but also supportive executive champion cannot be overstated. According to a recent Forrester study, it is nearly impossible for any business transformational initiative to succeed without the support of a strong executive commitment. Given the magnitude of resources necessary (personnel and capital), it is incumbent upon the senior management team to ensure that there


is the proper level of support required to ensure maximum success of these initiatives.

9. PMO lacks infrastructure for communication.

According to the Project Management Body of Knowledge (PMBOK), a project manager should spend 90% of their time communicating with their project stakeholders. This number is dramatically reduced when it comes to PMOs. As companies transition to more agile PMO practices, it necessitates continual information sharing, such as gathering feedback about what works and what doesn’t in current practices, as well as feedback about recent changes. Offer education and status sessions frequently so that stakeholders and sponsors see the transition’s context and changes’ impact. Reporting portfolio status, demand, resource forecasts, and utilization as well as process improvement metrics to the appropriate roles in the organization removes the mystery around how the PMO supports the organization. Speaking with PMO leaders, this is an important area they admit requires room for improvement.

4 Steps To Accelerate Your PMO Success

Today IT leaders are on the hook to deliver measurable business contributions at optimal cost, increase IT project ROIs, and reduce total cost of ownership. But how do you optimize your performance if you don’t know your starting point? Even if you have a baseline, is it up-to-date and something you fully trust? What’s the best approach for making improvements? This is where the role of the PMO has become extremely important to many CIOs and their IT departments.

With that said, it is also apparent from examining the “9 deadly sins” that there are still pitfalls that will have to be addressed. Based on our experience and industry best practices, we know for sure that there are 4 steps that can significantly transform a PMO from mediocre to exceptional.

Step 1 – Become a Value Innovation Driven Organization

Value innovation is a concept that was developed by W. Chen Kim and Renee Mauborgne in their award-winning book, “Blue Ocean Strategy.” Value innovation is about delivering exceptional value to the most important customer in the value chain all of the time, every time.


Based on this premise, we encourage PMO leaders to ask only two questions:

è Who is the most important customer in my value chain?

è How can I deliver exceptional value to the most important customer?

We know as a matter of fact if any PMO can answer these questions unequivocally, they will be on the path to addressing concerns about their value and contributions to their company’s bottom-lines. By embracing value innovation, PMO leaders will quickly identify that their most important customer is the business. Once this fact is established, PMOs will quickly start aligning their projects to reflect business strategies and priorities, thereby releasing PMOs from the requirement to justify their existence and benefit contributions.

Step 2 – Redefine PMO Metrics and Measure What Matters

PMOs have fallen into the quandary of checking a task just to make sure it was done. The question that we pose to clients is: how comfortable are you that the data you reported will allow the company to make a $1 million investment? Almost always these responses are very tepid.

At OMNI, based on years of consulting experience, we recommend that PMOs focus on six basic metrics to report their project portfolio status to all their stakeholders.

è Performance (Earned Value = Schedule and Cost Performance Indices)

è Productivity (Size, Level of Effort, Utilization, and Compliance)

è Financial (Quick Ratios = NPV, BEP, IRR, Payback)

è Risks (Risk Score based on ongoing assessments)

è Quality (Cost of poor quality)

è Strategy (Measure contribution to business drivers)

Step 3 – Aligning Project Demand with Supply

The strategic importance of aligning demand requires alignment not just to business objectives and IT strategy, but also to enterprise architecture standards. The PMO’s increasing involvement with demand management extends to analyzing requests for work and resources and aligning them with the four key management functions of IT: demand management, service management, portfolio management, and vendor management.


Step 4 – Set Clear Expectations

Set expectations about the PMO’s role in the organization. Companies should expect some resistance to the PMO’s expanded footprint, especially in terms of demand and resource management. It is not unusual for departmental managers to interpret this as a loss of control in determining their employees’ work. Executives and the PMO leadership must communicate that by providing greater visibility into the process, managers are actually gaining additional control in determining what should be worked on and how their budgets are being directed.


Conclusion

As we conclude, it is important to note that the role of the PMO in most IT organizations has become a permanent fixture given their massive contributions and successes they have garnered over the past decade. As a result, world-class organizations are focusing on creating next generation PMOs that are being expanded into Enterprise PMOs, with the intent to help drive major business projects and initiatives across their organizations. To this end, PMOs today are under immense pressure to create and drive business value through transformation and effective project management processes. To accomplish these huge expectations, there is a likelihood that well-intended PMO leaders in their exuberance may have in one way or the other committed the deadly sins in their pursuit of operating their PMO.

With that said, we know from experience, should PMOs fall into any of these pitfalls, embracing the four steps mentioned in this paper will help accelerate their future success.

Recommended Reference Materials

Davenport, Thomas H.; Jeanne G. Harris; Robert Morison (2010). Analytics at Work: Smart Decisions, Better Results. Harvard Business School Press

Davenport, Thomas H.; Jeanne G. Harris (2007). Competing on Analytics: The New Science of Winning. Harvard Business School Press

Kim, W. C. and Mauborgne, R. (2005). "Blue Ocean Strategy," Harvard Business School Press, Cambridge. MA. !!

Lee, R. K. and Goodrich, N. E. (2012). "Value Innovation Works," Createspace.com, Charleston, SC

Lewis, Michael (April 2004). Moneyball: The Art of Winning an Unfair Game. W.W. Norton & Co.


About the Author

Alvin McBorrough is a managing partner at the OMNI Consulting Group, a management and technology firm that is committed to enabling client executives to successfully support and manage their most important business and IT initiatives.

Mr. McBorrough has over 18 years of experience in consulting, strategy, and operations. Most recently, he spent five years at Cisco as a senior program manager providing advisory services, program management, enterprise architecture transformation, and strategic innovation for many larger clients around the world.

Mr. McBorrough holds an MBA (Strategy & Finance) from the University of Chicago, a M.S. in Telecommunications (Management & Strategy) from the University of Denver, and a B.A. from the University of Ghana (History & Religions).

è Contact Us

Name: Alvin McBorrough Address: 17317 E. Caley Lane Aurora, CO 80016 USA Email: [email protected] Website: www.omni-pm.com Tel: 720-281-9672 Fax: 303-693-3305

The OMNI Consulting Group is a management and technology firm that is committed to enabling client executives to successfully manage and execute their most important business and IT initiatives. We have demonstrated expertise in supporting senior executives in formulating, planning, and executing programs that improve the responsiveness, adaptability, and cost-effectiveness of their organizations that drive overall business performance, productivity, and profits. For more information about OMNI, please visit www.omni-pm.com.

9 deadly sins every pmo should avoid omni red paper - may 2012

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