Strategic alignment of horizontal and vertical pmo goals final

Project Management National Conference 2011 PMI India

Application of Select Tools of Psychology for Effective Project Management2|P a g e

Tathagat Varma, PMPSr. Director, Corp PMO

Strategic Alignment of Horizontal and Vertical PMO Goals


Application of Select Tools of Psychology for Effective Project Management

Contents

1 Abstract .............................................................................................................................. 4 2 Keywords ........................................................................................................................... 4 3 Introduction ........................................................................................................................ 4 4 Program Management in R&D Organizations ................................................................... 5 5 Strategy Execution via Vertical Program Management ..................................................... 5 6 Managing Organizational Excellence via Strategic Horizontal Program Management ..... 8 7 Aligning Horizontal Strategic Programs to Organizational Strategy ............................... 10 8 Conclusions ..................................................................................................................... 11 9 Acknowledgements .......................................................................................................... 14 10 References ...................................................................................................................... 14 11 Author’s Profile .............................................................................................................. 15

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1 Abstract

Today’s R&D organizations are highly matrixed. A PMO in a typical product team must work with several peers in engineering, QA, product management, usability, marketing and several other functions, neither of who report into her. She must align all these functions to the product roadmap and to the larger overall goals and objectives of her product group.

As the product organizations grow, there is an inevitable need for Strategic PMO to integrate back various functionally independent product groups on common systemic issues and create an interlock to reinforce each of the components. Strategic PMOs in this role have an added level of complexity working with vertical PMOs who don’t have same level of priority for the strategic horizontal initiatives. Often, their goals are at crossroads.

In this paper, we discuss a framework to create a strategic alignment of organization-level strategic PMO goals (“Horizontal Strategic Programs”) and product group-level operational PMO goals (“Vertical Programs”) into seamless team efforts. Finally, we present a case study on strategic horizontal programs at Yahoo! R&D India

2 Keywords

Agency Theory, Horizontal Strategic Programs, PMO, Strategic Alignment, Vertical Program Management

3 Introduction

Product companies face the unique simultaneous challenges of globalization, intense marketplace competition, higher obsolescence rates for technology and products, internet, shareholder expectations of higher and faster ROI, customer expectations of investment protection and lowering price-points, and painfully slow recovery in post-recession era. Most companies design business strategies to address some of these issues, but statistics show that most of them fail miserably. Kaplan and Norton reported failure rates of 60 to 90% [5]. They talked about how companies often made a major error by continuing to plan, allocate resources, budget, report, communicate, and review performance as they had in the past. American Management Association reported “…higher-performing organizations were considerably more likely to align organizational goals with strategy, and that speed and adaptability are also differentiators between higher and lower market performers…higher performers demonstrate “the ability to

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quickly and effectively execute when new strategic opportunities arise.” Another differentiator is “having an adaptive organizational infrastructure.” These findings suggest that adaptive organizational infrastructures – in combination with clarity and alignment – help organizations react more quickly to new strategic opportunities” [1].

A key factor that impedes successful execution of strategy is the lack of so-called “strategy integrity”. Iansiti talks about the top-down directed strategy that leaders want their organizations to execute but what actually gets followed is the “emergent strategy” and could be out of alignment with the directed strategy [7]. Clearly, there is a need for an ongoing process to keep tight alignment between the two.

4 Program Management in R&D Organizations

In response to several of these challenges, product development in R&D organizations has come a long way from being vertically-integrated silos that did every part of the product by themselves to a more open and collaborative approach that allows for functional expertise to develop in their natural homes and requires a program management approach to tie it down all together to create products for the market. In many cases, pieces of technology or solutions might even come from outside the organization – universities, open-source or even freelancers. Such an organizational model for R&D organizations is not only more efficient considering limited R&D dollars with just about anyone, it even is a necessity considering that no company can possibly hire all the top talent. P&G estimated “…that for every P&G researcher there were 200 scientists or engineers elsewhere in the world who were just as good – a total of perhaps 1.5 million people whose talents we could potentially use” [4]. Integrating such talent for product creation calls for radical approaches than the conventional functional models of yesteryears.

Program management has gradually emerged as the unifying force in commercial enterprises in last decade (though its origins were in US defense and aerospace industries in late ‘50s), and it is now generally acknowledged that managing a matrixed organization using program management is not only far more efficient, it also allows for best ideas to be tapped from just about anywhere in the organization. It is also considered as the “…link between a portfolio of strategic initiatives and component projects” [2].

5 Strategy Execution via Vertical Program Management

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In the last decade, program management role has evolved as the one that manages across boundaries to execute a product creation process involving multiple entities that are interrelated and interdependent [8]. Even though various organizations have relatively different understandings of program management, they all essentially manage at the interfaces: work with various teams to determine and negotiate interdependencies among component projects, establish and manage the big picture while delegating the actual execution to its component projects, and so on. Hanford makes a clear distinction between programs that manage interdependencies and integrate the work of component projects, and component projects that direct work and allocate resources [3]. Martinelli and Waddell liken them to organizational ‘glue’ that can translate strategic and business objectives into actionable plans, and then manage the product development tactics into deliverables that achieve the desired results [6].

In a typical product creation team, a program manager might have several interfaces with functionally different groups such as the product manager, product architect, hardware manager, software manager, QA manager, manufacturing manager and finally the marketing manager. As the product develops, program manager must establish and maintain close contact with each of these key players and ensure smooth hand-offs across interfaces for the eventual success of the program – mere success of component projects is not enough. In addition, the program manager is also the key interface to senior management having been chartered to execute a given program. She must ensure that all strategic objectives assigned to a given program are eventually achieved.

Figure 1: A Program Manager interacts with managers of various component projects

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In addition to being the primary vehicle for strategy execution, this model has proven to be highly effective in resolving the issue of accountability for a program. In a traditional silo approach, each function group would only focus on their tasks at hand and try to ensure its success – sometimes even at the cost of subordinating the larger product or the company goals. In other words, we see agency theory at work. A program management approach ensures that a clear accountability is established for each of the parts as well as the whole, and is thus a smart way to eliminate the side effects of agency theory.

This model allows breaking down strategy into tangible action items and provides well-defined vehicles for execution. However, it is still rather ‘vertical’ and delivery-oriented in nature. It only takes up pieces of strategy that are very strongly tied to tangible deliverables, for example, releasing a new online e-commerce site, or launching a new smartphone. It essentially builds on ‘hard’ organizational competencies such as creating a new multi-touch app for a tablet, or designing the architecture to scale website to million of users. No doubt that program management is highly effective in being able to tap such technical talent in a typical large organization where such competencies might be spread globally across its various R&D centers, it must still rely on largely existing competence to solve a business problem.

Figure 2: Programs allow strategy to be executed and benefits to be realized

However, not all elements of organizational strategy might be addressable by delivery-oriented programs alone. For example, if an organization aspires to create and sustain its ability to design killer apps to stay competitive for next five years, it would not only require identifying some flagship apps in its portfolio but also devising a mechanism to proliferate such knowledge and competencies to

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rest of the organization – and build and sustain it over the next couple of years. Similarly, an organization might need to inculcate the spirit of innovation among its rank and file so that ideas are generated everywhere within the organization, which would require a big culture change. It would be difficult to imagine that a handful of apps would bring about holistic changes in that organization’s ability to sustain the competitive edge on all fronts. Similarly, there might be other islands of excellence within an organization with better solutions than the one accessible to those delivery-oriented programs. However, in the absence of any mechanism to ‘discover’ them, a program manager might already have too much on her plate to explore it further.

Clearly, there is a need to create multi-way communication and coordination channels that fill up such gaps. However, it might not be possible to expect ‘vertical programs’ to take them up due to their laser-sharp focused charter on immediate and tangible deliverables.

6 Managing Organizational Excellence via Strategic Horizontal Program Management

Strategic horizontal programs is a relatively new concept in most organizations, hence it is required to explain its context. We saw in the earlier discussion that strategy execution essentially means using a portfolio management approach to translate strategic intent into programs and prioritize them based on certain factors like the ROI. However, there are implicit and intangible elements of strategy that need to be owned, coordinated and managed for the tangible elements to be adequately support for scalability across the organization and sustainability through the coming years. It is quite possible to make an ace team to address an immediate problem at hand, but if nothing else it done, the competitive advantage so gained could weaken due to turnover in team, or other parts of the organization still operating sub-optimally, and so on. Clearly, we need to address the strategy holistically encompassing all aspects of the organization.

Here are some examples:

• When Apple talks about user experience, it is not limited to its software alone. The packaging of the box, the design and layout of Apple stores, seamless integration with iTunes, the design of its hardware – everything counts! While achieving a certain level of quality might be possible for one product in the short run, how do you create a culture of excellence throughout the organization?

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• In the ranking of Best Universities 2010, Cambridge University, UK, came tops. If another university wants to emulate that achievement, it is not a uni-axis goal. They must compete on multi-axes like Academic Peer Review Score, Employer Review Score, Student to Faculty Score, International Faculty Score, International Students Score, and Citations per faculty score. All these scores must be simultaneously improved in all schools and faculties within the university.

• When Yahoo! talks about being “the premier digital media company”, it is not limiting itself to just a few of its web properties. It must be able to offer similar ‘wow’ user experience to all its users whether they use News, Finance, Autos, Cricket or Real Estate or any other Yahoo! properties. A program can be undertaken to rapidly upgrade one property, but to ensure that similar design nuances are incorporated across the board needs for a common thought process throughout the organization.

The challenge is how to address such ‘soft’ elements of the strategy that are often implicit and can’t be assigned to one delivery program alone. Programs can build products but can they build culture? Programs might utilize brilliancy of an architect to design the next cool product, but can they help create more of similar competence in the organization? Programs might be able to exploit the state of art but can they question the status quo and advance it, for example rollout new processes and methodologies across the organization? And finally, programs might be able to cherry-pick best engineers to design the most important next generation product, but can they ensure that rest of the organization also constantly upgrades its ability and performance? These are but some intangible elements of organizational changes that must be undertaken in tandem with the programs that deliver tangible deliverables. Ignoring them could mean that short-term success is not scalable to rest of the organization, or not sustainable in the long run, or both.

In my opinion, conventional vertical programs are designed to succeed in their charter and thus, can’t take up any of the organizational change initiatives like the ones mentioned above. There is a clear need for a separate entity that is chartered to centrally coordinate such ‘horizontal strategic initiatives’ that span the entire organization instead of just being limited to one product group, or one product or technology alone.

Horizontal strategic programs is an evolving mechanism to create a centralized lightweight team that works with top leadership to identify and prioritize elements of strategy that must be undertaken for holistic growth of the organization. This team is often very small and is staffed with senior program managers chartered with the oversight of organizational change management. It is not entirely new concept, however. Its earlier avatars were in handing over process quality to a separate quality process group and assigning the people management and

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cultural aspects of changes to the HR. This was a highly fragmented approach that was never able to create a lockstep among all the activities, in addition to creating another level of agency theory impact – each of those groups was responsible for executing their horizontal programs but no one group was eventually responsible for assimilating it all. Horizontal strategic programs address the aspect of creating a harmony and synerfy among its constituents. It doesn’t seek to control them, much less manage them, but leverage on the work done by its constituents after carefully negotiating a common set of goals.

7 Aligning Horizontal Strategic Programs to Organizational Strategy

A well-run organization would typically detail out its long-term strategy and identify goals that reflect accomplishment of the strategy (or its interim milestones). All subordinate activities need to be aligned to these goals. However, this alignment process is not a one-time process – even though it might be typically carried out annually, it needs to be constantly monitored for any changes in the overall strategy or direction.

Based on our earlier discussion, these goals can be broadly broken down into tangible and intangible goals. Tangible goals would typically lead to vertical programs and intangible goals would create horizontal strategic programs. However, creation and execution of these programs in isolation would again lead to disconnect between the two. The need is to create goals and negotiate them both vertically and horizontally in goal alignment sessions. As a result of such exercise, delivery programs might also find some additional non-core activity assigned to them. This might also happen indirectly, e.g., some percentage of architect’s effort is identified for organizational activities.

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Figure 3: Goals are assigned to Horizontal and Vertical Programs and tracked each quarter

Once goals are assigned, program managers are chartered with realization of those goals. Delivery PMOs track benefits realization in delivery-led programs while Horizontal PMOs track similar metrics for horizontal strategic programs. Each quarter, these metrics are collated at the organization level and reviewed by the leadership team. Depending on the need, KPIs can be created that allow focusing on some core metrics instead of several operational metrics. Any performance deviation is root-caused and appropriate corrective and preventive actions identified and tracked in respective programs over the next quarter.

This closed-loop management of entire strategy execution process ensures the following:

1. There is adequate transparency about shared goals among all stakeholders

2. Horizontal and Delivery programs interact on shared goals without any major conflict

3. Measurements of success are defined upfront leading to no dual measures or surprises for anyone

4. At the end of the day, an organization can assess how its various programs are leading to scalable and sustainable progress

8 Conclusions

Translating organizational strategy into flawless execution requires program management as the bridge that translates strategic initiatives identified in the portfolio into tangible projects that must be coordinated to achieve desired benefits. Traditional view of programs often turns into very specific vertical activities that allow collaboration across various participating groups and individuals. However, it leaves out bigger issues in terms of providing the tide that lifts all boats together. The result is that brilliant successes in one area of the organization doesn’t necessarily get absorbed into improved capabilities or process effectiveness in rest of the organizations. A holistic strategy execution requires all-round improvement that traditional ‘vertical PMOs’ are not designed to manage.

A horizontal strategic PMO, on the other hand, is a radically different way to manage proliferation of ideas and best practices across the organization and aims to coordinate such two-way exchange of knowledge so that culture is built

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at organization level for innovation and process. It creates clear responsibilities and accountabilities and ensures there is no conflict among vertical programs and horizontal strategic programs. Further, it also allows for a mechanism to holistically track the progress made by the entire organization on periodic basis.

Case Study: Strategic Horizontal Programs at Yahoo! R&D India

At Yahoo! R&D India, we have identified several horizontal strategic programs to address some of the unique challenges that any large innovation-driven product organization faces when specialization and high-focus could potentially lead to creation of silos. Even though such silos could be highly impactful in delivering on immediate product delivery goals, they could also potentially fail to incorporate some of the ideas and best practices from rest of the organization. We talk about some of the key initiatives under the horizontal programs:

Academic Relations (AR): Yahoo! Labs works closely with top universities across the globe to identify and nurture talented students from as early as their freshman years. Some of the key programs to engage academic and student community include HackU (a program that expose students to Yahoo! APIs and products, and encourages them to demonstrate a working software developed in a period of 24 hours), Summer Internships (that help students with real-life experience of working in an internet company like Yahoo!, and even pursue the prize-winning ideas for those coming via HackU program), Key Scientific Challenges (a competition targeted specifically at PhD students to partner with a company to help solve some of the hardest problems facing an industry), Summer School (where we bring students with a penchant for research and IT practitioners inspired to innovate under a single umbrella for learning a specific topic which is fundamental to Web sciences (e.g., machine learning, information retrieval), and PhD program in coordination with premier India campuses where a Yahoo! employee can apply for undertaking PhD over a period of four years – all along staying as a full-time employee.

The programs allow us to develop deeply synergistic engagements with the top campuses.

TechPMO: TechPMO seeks to improve overall technical capabilities of the organization in terms of technical talent and design and development process effectiveness. It involves identifying various programs with different levels of participation and immersion period. For example, Tech Talks are conducted frequently where anyone can sign-up. An advance version of such tech talks is the so-called Under the Hood (or UTH), which are very technical deep-dive sessions that allow architects to talk about intricate details of various platforms and technologies for a more technical audience. These programs reach everyone in the organization. The program Architect Development Program

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(or ADP) is a program to groom future architects over a period of six months. There is a high bar of performance to be maintained and considering the long immersion period, there is a huge ROI in terms of preparing the mentee for taking up high-end of problems at the end of the mentoring period. In addition, TechPMO is also involved in running the IP (Intellectual Property) program at the center-level that allows pooling approach to create a critical mass of ideas to protect our technical know-how. We also run an internal paper contest known as TechPACO that gives a platform for our engineers to articulate their ideas in a technical paper and take it to larger stage. Finally, TechPMO is also chartered with creating knowledge assets and process elements to allow for seamless sharing of knowledge and ideas.

The progress of this program is measured on both – input-driven as well as output-driven metrics. This allows us to view short-term tangibles as well as the long-term intangibles while assessing effectiveness of the program.

Yahoo Entrepreneur Program (YEN): YEN is the in-house program to take innovation to all corners of the organization and provide a systemic framework to take up ideas to their next logical stage. Programs such as Hack Days (a dedicated day when all employees participate in building their ideas as working software and presenting to an expert panel) and ID8 (a mini-business plan competition where employees come up with ideas aligning with specified problem statements) provide unique opportunities for every engineer in the organization to participate with their ideas and the YEN team works with product managers to identify productization opportunities. This allows for an out-of-band follow-up that would not be possible otherwise. In addition, YEN also looks at external stakeholders such as startups, venture community, trade bodies, students and academia for leveraging them for open innovation and partnerships. Programs such as Open Hack Day where any developer can build their ideas over a 24 hr period help identify partner opportunities and open innovation by scanning the external horizon and find a right home within the organization.

YEN program is measured on hard metrics that move the needle – not only in terms of how many ideas were generated but how many actually made it to the product launches or how much topline impact did they create in terms of audience or revenue impact.

Business Excellence Program: Business Excellence program is the overarching umbrella under which we execute all horizontal strategic programs and it provides a framework to distill each of strategic initiatives into horizontal programs and finally into measurable elements that are tracked in quarterly reviews using KPIs (Key Performance Indicators). This allows for a closed-loop management of all the programs, and the leadership is kept abreast of the

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progress being made on periodic basis. Performance deviations are identified and root-caused to be worked on in the coming quarter.

At the R&D centre level, we have identified goals for the year and they have been socialized with each of the product group heads as well as the horizontal function leads. This makes sure that there is just one set of goals for all stakeholders against which operational plans are being created and the progress being tracked.

9 Acknowledgements

I am thankful to my organization Yahoo! R&D India for case study on horizontal programs for this paper.

10 References

[1] American Management Association, “A Clear Path to Strategy Execution”, February 7, 2007. Available at http://www.amanet.org/training/articles/A-Clear-Path-to-Strategy-Execution.aspx

[2] Ruchira Chatterjee, “Why Program Management is an Essential Part of Strategy Execution”, available at http://www.projecttimes.com/articles/why-program-management-is-an-essential-part-of-strategy-execution.html

[3] Michael F Hanford, “Program Management: Different from Project Management”, IBM DeveloperWorks, May 14, 2004. Available at http://www.ibm.com/developerworks/rational/library/4751.html

[4] Larry Huston and Nabil Sakkab, “P&G’s New Innovation Model”, Harvard Business School Working Knowledge, Mar 20, 2006. Available at http://hbswk.hbs.edu/archive/5258.html

[5] Robert Kaplan and David Norton, “Creating the Office of Strategy Management”, Harvard Business School Working Knowledge, July 5, 2006

[6] Russ Martinelli and Jim Waddell, “Aligning Program Management to Business Strategy”, PMForum.org, 2005. Available at http://pmforum.org/library/papers/2005/AligningPMBusiness%20Strategy.pdf

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http://pmforum.org/library/papers/2005/AligningPMBusiness%20Strategy.pdf

http://pmforum.org/library/papers/2005/AligningPMBusiness%20Strategy.pdf

http://hbswk.hbs.edu/archive/5258.html

http://www.ibm.com/developerworks/rational/library/4751.html

http://www.projecttimes.com/articles/why-program-management-is-an-essential-part-of-strategy-execution.html

http://www.projecttimes.com/articles/why-program-management-is-an-essential-part-of-strategy-execution.html

http://www.amanet.org/training/articles/A-Clear-Path-to-Strategy-Execution.aspx

http://www.amanet.org/training/articles/A-Clear-Path-to-Strategy-Execution.aspx



[7] Sean Silverthrone, “Q&A with Marco Iansiti: One Strategy: Aligning Planning and Execution”, Harvard Business School Working Knowledge, March 22, 2010

[8] Tathagat Varma, “Project Management vs. Program Management”, blog posted on April 17, 2011. Available at http://managewell.net/?p=108

11 Author’s Profile

Bio: Tathagat Varma, Sr. Member IEEE, PMP, PRINCE2TM Registered Practitioner, CSM, heads Corporate PMO and Business Operations at Yahoo! Software Development India. He is responsible for managing strategic horizontal programs across the India R&D centre. Tathagat has an MS in Computer Science and exec MBA in HR. Over the past 20 years, he has been engaged in product development with Defense Research with Indian Government, and subsequently with Siemens Telecom, Philips Medical Systems and Digital Networks divisions, Huawei Technologies and NetScout Systems prior to joining at Yahoo. His core expertise is large-scale product development, program management, software engineering and general management. Tathagat volunteers with PMI (NPDSIG) and IEEE Technology Management Council and is a visiting faculty on Project Management and Business Ethics courses. He also blogs on his views on strategy, leadership, execution and management of software development at http://www.managewell.net.

[email protected]

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http://www.managewell.net/

http://managewell.net/?p=108

Strategic alignment of horizontal and vertical pmo goals final

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