The Rise of the Strategic PMO
Increasingly we see the project management office (PMO) evolving beyond an administrative function to one that is strategic in nature and more closely aligned with business drivers. As the pace of business increases and with it the expectation of faster returns on investment, there is an important role for the PMO to play in delivering business value.
Traditional administrative PMOs are failing to meet this requirement. What is needed is a change of mindset and a transformed project delivery capability that is both commercially astute and agile. The PMO must understand strategy and be able to put it into practice.
In this article, I look at the factors driving the transformation towards strategic project management offices (SPMO) also sometimes referred to as Enterprise PMO or EPMO, the key characteristics of a value-adding PMO and provide 5 game changers to help you transform your PMO and raise its profile in your organisation.
Most IT Projects Fail to Deliver Value
By Stephen Berry, Chief Executive Officer, DDE Technology
Published on 27 July, 2020
It is a sad truth but as highlighted in study after study, the perceived value of the PMO function is historically low. In an analysis conducted by Dr. Brian Hobbs (2005) in conjunction with more than 200 companies in the United States and Canada, 39% of the organisations reviewed questioned the value brought by the PMO to their companies. No doubt the high rate of project failure is a contributing factor to this perception.
As noted in a report from the Project Management Institute (PMI) in 2017, 14 percent of IT projects fail. However, that is just the tip of the iceberg as this number only represents total failures. Of the projects that didn’t fail outright, 31 percent didn’t meet their goals, 43 percent exceeded their initial budgets and 49 percent came in late. Another study by Harvard Business Review found that at least one in six IT projects turns into a "black swan" with a cost overrun of 200% and a schedule overrun of 70%.
In other words, while most IT projects will fall short of their budgetary targets, a few will overshoot the target so much so as to cause catastrophic organization-wide damage (both financial and reputational). PwC undertook an analysis of over 10,640 projects across many companies and found that օnly 2.5% of the companies surveyed considered their projects to be 100% successful.
According to Gartner, global IT spending is expected to reach USD $4 trillion in 2021. When you apply the preceding project failure metrics to this figure, it is clear that a significant amount of IT investment is likely to be wasted.
So, what can we do about it?
How to Deliver Business Value in Uncertain Times
“I Only Needed a Toyota.
You Gave Me a Rolls Royce
(and even that does not work)”
Does that refrain sound familiar?
As many project practitioners will know, overly complex solutions can lead to projects that fail to deliver the promised value. The risk of failure is compounded further when projects are not aligned with corporate strategy and lacking strong sponsorship.
In 2008, Qantas, the national airline of Australia cancelled a $40 million project named Jetsmart. Jetsmart was a project with the mandate to build a parts management system for the company’s aircraft mechanics. The solution however was so badly designed and overly complicated that the Qantas mechanics refused to use it. Worse still, the project led to union intervention and adverse publicity.
Representatives from Qantas later admitted that instead of asking the mechanics what they needed, they went ahead and built what they thought was appropriate. By failing to involve the right subject-matter experts, that is, the end users of the system, Qantas was forced to abandon a costly IT project, with the result that the company ended up taking another three years to build a replacement solution.
Examples such as these highlight the risks of not being in alignment with corporate strategy, poor communication and engagement between the project and business teams and a lack of transparency. To avoid major disasters like this it is better to “fail fast and for less”. As I will argue in this paper, a commercial mindset on the part of those overseeing and delivering major projects is critical.
Establishing a simple business immersion program designed to embed key project personnel in the respective business for a period to experience the day-to-day challenges and dynamics of business operations and laying the foundation for productive relationships can go some way towards closing this gap.
While there is always a confluence of factors for why large projects fail, we often see project organisations being too inwardly focused and not always clear on what they are building nor appreciative of the reasons why. This highlights the dichotomy that often exists between project teams and their business counterparts.
A curious manifestation of this is when a project is considered a success and yet, at the same time, a business failure. To the project team, success is when a project comes in on schedule and budget. Where our focus needs to be however is on the promised business benefits and whether they were achieved as a result of undertaking the project. Since these benefits may not be achievable until well beyond the project is finished, it is incumbent on the SPMO to ensure it has a mechanism in place for tracking future benefits. Essentially, this is a retrospective view on projects.
Getting Set Up for Success
It is highly recommended that ideas, initiatives or projects that involve effort and cost should have clear benefits cases attached with the mechanisms to track them – and these should be aligned to the strategic pillars of the organisation. As we have seen, the business nature and proposed benefits of a project are not always of particular interest to the project team and in some cases, not even rigorously managed by the sponsoring business unit itself and this is one of the reasons why so much IT expenditure is wasted. Furthermore, some business benefits may have a long horizon – well beyond the project lifecycle.
In this respect, the strategic PMO can play a significant role as custodians and evangelists for business benefits realisation providing the Executive with important information on which projects are delivering value across the organisation. The insights made available by the SPMO can facilitate important determinations such as which initiatives to fund, which projects to kill or re-prioritising or re-balancing portfolios of work to address shifting business or market conditions. Far too many organisations continue failed projects to the bitter end simply because a large amount of money has already been sunk up front.
Not all PMOs need to be strategic in nature. A PMO that is embedded within a project or program can be focused on the day-to-day requirements of that project in terms of resource management and administration. However, the overarching decision to begin the project should have been made at a strategic level and from inception, the project-level PMO aligned with the reporting and governance structure of the Strategic PMO. There should be an accurate and timely flow of project data up into the program and, ultimately portfolio level where micro and macro business decisions can be made by the SPMO.
If we can increase the maturity of a PMO such that it enables investment decisions to be made, this not only elevates the perception of the PMO within an organisation but also increases its functional value. Most PMOs are set up to run with approved projects (after the fact).
By adopting the right governance, mindset and operational and commercial principles however, the strategic PMO can get out in front to manage the ideation or opportunity pipeline process helping the Executive to establish quantitative and qualitative benefits with rigorous reporting on value as the project moves through its lifecycle. And as we have seen, the process of tracking benefits should not stop just because the project does.
The Strategic PMO has a key role to play in championing and pursuing business value for the organisation and being an effective enabler of change. In the following section, I look at 5 important game changers that will take your PMO and project organisation to the next level.
- Game Changer 1 -
Demonstrating Project Leadership and Vision
The “people” element plays a crucial role in the success of a project. The right mindset and discipline of the project leader are fundamental as is the chemistry and domain experience within the project team. Galvanising project teams around a common vision is equally important. If any project member is not clear on why they are doing a project, this already suggests misalignment or a lack of interest of the business context. A good project manager, and the SPMO more broadly need to understand the business strategy, design projects that support it and champion and uphold the vision until the results are delivered.
As we know, projects involve uncertainty and it is impossible to know all of the answers at the outset of a project. These answers will emerge as the project progresses through its phases. This can be unsettling for members of the project team. That is why the overarching goals of the project need to be understood and regularly reinforced to provide the team with a compass and ensure that morale and energy is maintained throughout.
On May 25, 1961 President John F. Kennedy announced his goal of putting a man on the moon by the end of that decade. When he delivered this speech however, the technology to do this did not exist and yet, projects that would last many years and involve hundreds of thousands of people were launched by NASA to pursue this lofty goal.
By holding true to the vision, you provide your project team with the inspiration and motivation to achieve the goal and overcome the many challenges and uncertainties that will be met along the way. This is all the more effective when the prize that awaits at the end of the journey is understood.
Effective project managers instil confidence in their teams – and likewise, the business units from which the initiatives originate. Again, a project leader cannot know all the answers in advance but that does not mean he or she should not act calmly, rationally and present as being well-organised and even-tempered.
If you have ever been on an aircraft that suddenly flies into bone-rattling turbulence you will most likely be waiting to hear a reassuring message from the cockpit to soothe your nerves. It doesn’t matter that an explanation is not given; just hearing the calm voice of someone who is control is important. Project leaders can apply the same principle when they experience project turbulence. Conversely, stakeholders will quickly sense when a project is out of control from the anxious, erratic demeanour of a project manager.
Effective project managers demonstrate the leadership traits I have outlined in addition to possessing commercial acumen. Indeed, the delivery of business value to the organisation is dependent on it. However, many of the people leading projects in organisations around the world are not professional project managers – maybe even reluctant project managers! A lot of theory is devoted to the various processes within the discipline of project management but when it comes to project leadership and behavioural competencies, there is much less to be said unfortunately.
The SPMO should be mindful of this and ensure that adequate coaching, mentorship and experiential learning is available for developing project managers. If a project can be considered as a temporary organisation much like a small company, then the project leader is in effect, the CEO. It is worth keeping that in mind when planning your future projects and their leaders?
- Game Changer 2 -
The Importance of Realistic Planning
We have already seen that any important initiative within an organisation should also come with a quantified business case and alignment with strategic imperatives. By “quantified”, we mean that the benefits are attainable and validated through rigorous vetting. It is important to understand how the benefits are to be measured. The Strategic PMO can play a role in this vetting process and challenge the Business’ assumptions and their attention to detail. This leads to a very different discussion than perhaps has traditionally been seen between the Business and the project organisation.
Once an opportunity or initiative has been approved and mobilised as a project, a realistic plan on how to achieve the expected outcomes is essential. This is where project management tools play an important role. Such tools should ensure that project managers are following a consistent governance approach to effectively manage the project lifecycle.
Projects of different sizes and complexity require different levels of governance and a good project management tool should facilitate this. Again, the SPMO can “right-size” the different governance levels relative to their organisations with project management templates aligned to these levels and supported in the project tool. Small projects need less governance structures and artefacts than do large projects. One size does not fit all.
Project management tools typically incorporate the project schedule (Gantt chart), cost and people (resources). To support a strategic approach however, benefits and quality factors should also be incorporated. We have discussed the importance of having a realistic business case to support the project. Equally important is a focus on quality. By “quality” we mean that the solution being built is fit for (business) purpose. Recall the Qantas example earlier. It would therefore be prudent to include quality review milestones in the schedule to ensure that the project team and their business counterparts have opportunities to review the solution at key phases.
The Agile delivery methodology seeks to create a continuous review cycle to address this however many organisations still rely on waterfall methodologies. Discovering that that the solution is not fit for purpose at the end of a project is not acceptable.
We highly recommend that serious attention is given to risk planning upfront and that all risks are included in the plan and tracked accordingly. A “risk” is any eventuality that can impact the cost, timing and quality (and by default, benefits) of the solution being built. Mitigation actions for each risk should be clearly agreed on in advance. For effective risk management, input should be sought from the business, stakeholders and users of the system at the very least. There is a lot to be gained by seeking the input of those of who have led similar projects in the past – and have the scars to prove it. It is far better to focus energy on risk planning up front to avoid having to clean up the impacts later via issue management.
For the SPMO, an aggregated view of risks across the enterprise broken down by portfolio, program, project, business unit, country and other relevant categories will be important for executive reporting. The SPMO should be able to identify risk “hot spots” across the organisation.
With the right internal structures and project data, the SPMO should be able to drill down to gain insights across portfolios, programs, projects business units and other categories. Similarly, issues, risks and benefits can be very viewed in the same way providing the organisation with a more holistic view of their projects.
To facilitate realistic planning, the project tool used by an organisation should not be complex. The fact that many projects are still run on Excel spreadsheets or worse, PowerPoint indicates that many project tools in companies are either too complex or non-existent. Similarly, the details to be included in the plan need to reflect the right level of detail. We recommend that in most cases tasks should be no longer than 1 – 2 weeks in duration so as to be manageable.
Don’t Eat the Whole Elephant!
To reduce the complexity of large projects which threaten to overwhelm the project team, it is recommended to decompose projects into smaller chunks. Rather than ”eating the whole elephant”, it is advisable to deconstruct the project into smaller, more manageable pieces. In project management, the term decomposition is used to refer to breaking down your scope into sizable proportions that are manageable, controllable, and executable.
Another important consideration for creating a realistic plan is to identify the critical path within each project. The critical path is essentially the best-case (earliest) date for when a project can be delivered with careful consideration and visibility given to the all things that can impact that delivery date.
To create a critical path, you will need to include all the milestones in your plan that have a dependency on one critical activity completing or another critical activity starting. For example, where a task or activity can only commence when a certain event, time or condition is met. Activities that can occur in parallel do not impact or feature in the critical path. The dependencies shown in the critical path should also be included in the register of project risks so that they are visible to the project team and that adequate mitigations have been developed to manage them. Critical path planning is a reflection of a mature project organisation.
Again, seeking the input of domain experts that have undertaken similar projects before is particularly beneficial for drawing on experience and uncovering all pertinent risks to support the delivery of successful projects.
- Game Changer 3 -
A Culture of Disciplined Execution
So now that you have a realistic plan of work you are ready to “work your plan”. Projects involve change and with that comes a level of uncertainty. Keeping the plan up to date with regular checkpoints is essential. The current business environment, sharply impacted by the COVID-19 virus has ratcheted uncertainty up to a new level altogether. For that reason, we recommend a heightened focus on your plan. A project that is well-planned and well-run will boost morale in the project team and elicit confidence from the business stakeholders. Conversely, a poorly run project with poor planning will have the opposite effect.
Variations to the plan (e.g. milestones that will not be met as planned) should be tracked on a weekly basis with actuals updated and recovery actions put in place for how to get back on track. Regular reviews of the project plan serve as an early warning system. This should be a collaborative process in concert with business stakeholders and any other impacted party.
Business benefits should be part of the project plan and need to be regularly reassessed in light of variations to cost, schedule and quality. Such variations will likely change the benefits promised in the business case and it will be necessary to determine if the changed benefits are still worth pursuing or in need of adjustment. It is also important to ensure that any activities being undertaken by team members that are not in the plan should be called out immediately. Scope creep is a risk to any project; more so in larger projects. It is the role of the project manager to ensure that only sanctioned activities are being undertaken.
If the maturity level of the project delivery team is relatively low, the SPMO can act as arbiters with the Business in dealing with project variations (particularly if any contractual variations are required with vendors or other more complex commercial activities). Variations are not always negative, however. For example, if it is determined at a certain point that an increase to the project budget of $100K (perhaps for adopting a new technology or service) will deliver a return of $1M, the increase should of course be assessed. This is a great example of the project organisation evolving to be proactive and commercially-savvy rather than just running with projects that are allocated to them. Being able to have this kind of discussion with your business counterparts will elevate the trust that they place in you and your team.
Baseline management is another important element to consider. A baseline contains the original estimates for the project (cost, effort, time etc.) and is, in effect the “contract” upon which the project was originally based. In project environments with weak discipline, we often see project managers re-baselining projects at will (for example, amending the budget or schedule) in order to keep the status indicators green. There should be considerable rigour applied to the process of re-baselining (both from the project organisation and from the business).
A change to the project baseline will impact the benefits that were originally promised. Re-baselining is a perfectly acceptable activity to enable a project to address changes to business or market conditions but it must follow the right governance and commercial process and the business case needs to be re-assessed in light of the proposed changes. Approved baseline variations within the project should be retained so that the start and end metrics of a project can be compared (“we said it would cost X, but it ended up costing Y”). This is an important part of the project learnings which may provide guidance for similar projects or estimation processes in the future.
We have seen how regular project plan reviews can act as an early warning system to intercept or mitigate events that impact project deliverables. Issue management is the mechanism by which we do this. Effective issue management involves creating recovery actions or plans that should be agreed to by all impacted parties. In some respects, such actions can be regarded as mini projects as they involve people, activities, time and other resources.
For this reason, they must be taken seriously and managed with the appropriate governance. All too often we see issue registers buried in people’s drawers. We highly recommend that a central action tracking register of all project issues ranked by priority be established with regular meetings to review and manage. For low maturity project environments, the SPMO should govern issue management and ideally, have an aggregated view of risks across all of their projects to ensure their “finger is on the pulse”.
There is a risk in organisations for project managers and PMOs to hide the truth or obscure the bad news. This might manifest in status reports that continually show a sea of green (status indicators) or little to no open communication with business stakeholders. This normally reflects low project maturity and poor engagement. It is imperative to foster a strong relationship between project teams and the Business where difficult conversations can be had in a transparent and constructive way. The ability to undertake difficult conversations is a key requirement for a mature project manager and we recommend the SPMO provides the coaching to support this.
Project reporting should be transparent and concise with a focus on the key metrics that are relevant to stakeholders such as variations to the schedule, milestones, cost and of course, benefits. As part of building confidence with business stakeholders, it may be prudent to agree with stakeholders what additional information they want to see reflected in the report. Reporting should follow the KISS principle (Keep it Simple, Stupid). Reports involving reams of paper are unlikely to be read and reports containing a bewildering range of metrics may lose sight of the key information and decision points.
I have discussed the importance of transparency and openness and this should be a feature of reporting as well. In the business community, no one likes surprises such as budget blowouts, milestone delays and the like. This is not however an excuse to hide the truth. When bad news needs to be delivered, we recommend organising a phone call or face-to-face meeting if possible (avoid email) with stakeholders in advance to socialise the relevant information. This can potentially de-escalate tension later when the news “drops” in a report or worse, by rumour or a leak and goes a long way to building trust and confidence with stakeholders. The stakeholder will most likely still be unhappy with the news but will respect you for the way in which they have been consulted and the situation handled.
Again, the SPMO has a role to play in owning this maturity journey and coaching their PMs along the way.
- Game Changer 4 -
Effective Stakeholder and Change Management
We have discussed the way in which leadership qualities support project managers in galvanising project teams and instilling confidence in business stakeholders. Effective leadership and engagement are important for the Strategic PMO as well and contributes to its positioning in the enterprise. The SPMO should be engaged in regular interaction with the Executive and internal business units. This interaction may also extend to stakeholders outside the organisation including vendors, regulatory bodies, government entities and other groups.
Leaders who are persuasive and competent negotiators will be more effective in this regard. As we have stated before, a strategic project management office is not simply a reactive, administrative function. It should engage in robust discussion with business stakeholders, challenge assumptions and shape projects based on the requirements and realities of the business. Project leaders who have considerable experience running projects with domain expertise should bring their experience to bear during this process.
For inflight projects, the SPMO should ensure that a project change review board (sometimes referred to as CCB) is in place. The CCB is comprised of people who are responsible for making the ultimate decision as to when and if any changes are to be made to projects. The process in which the Change Control Board determines if a series of changes should be made is two-fold; first, the Change Control Board needs to assess the impact of the proposed changes to the project and, after undertaking that evaluation, the Change Control Board will then either approve the changes, reject the changes, or, in some cases, request more information or postpone the decision pending further information that would factor into their ultimate decision.
Significant changes that will in fact have an impact on project baselines and benefits should be put through the CCB for review and approval.
Another governance forum that should be considered, particularly when business conditions are uncertain or prone to change is the Project Prioritisation Board. This function provides a more holistic view of a portfolio or program of work and continually assesses the strategic and commercial contribution of individual projects within the portfolio.
Depending on different factors, it may be necessary to reorder the priority of projects in the portfolio and redirect financial and people resources accordingly to achieve the desired business outcomes. This function will require both the SPMO and relevant business units to be involved in order to make the right determinations and garner the support to make it happen.
For the Project Prioritisation Board to function effectively, it will require relevant project information from across the portfolio to be available in real time (consider the key reporting metrics we discussed previously). This will be very difficult to achieve where there are a variety of project tools are used in the organisation or worse still, no project tools at all.
For our final game changer, we look at the importance of an enterprise portfolio management tool for ensuring that project data across the organisation is consistent, accurate and leverageable.
- Game Changer 5 -
Creating a “Value Lens” for Managing Enterprise Investment
As we have seen in this paper, a significant amount of IT investment is wasted each year on projects that are poorly managed, not aligned with corporate strategy and operating within silos (i.e. off radar). I have considered the behavioural and mindset changes that should be adopted as part of a mature and value-adding project organisation. In this final section, I will discuss project tools and how they play an important role in achieving whole-of-life benefits for organisations.
We know that many people who find themselves running projects are not professional project managers. In fact, there is not a lot of consensus on what defines a “professional” project manager. While various institutions offer certified project management courses, many of them pay little heed to the important leadership and behavioural qualities I have discussed in this paper and many project managers receive no training at all.
The reality is that many individuals will find themselves leading a project with a sizeable budget but very little support to guide them to a successful outcome. The choice of project tool can therefore be an important determinant in minimising the risk posed by inexperienced project managers.
The problem with many project management tools however is that they can be too complex for users and assume that users know what they are doing. It is important for the project tool to be easy to use to encourage all project managers to use it. This will ensure more consistent governance within the project delivery community and allow aggregation of project data that will form the basis of portfolio management and in turn, relevant decision-making.
In addition to ease-of-use, we recommend tools that utilise secure, cloud-based architectures. Ideally the SPMO will want to be able to see integrated project data from all projects in real time with roll-up and drill-down capability. This will only be possible if every project manager is using the same tool and if the architecture of the tool supports this kind of integration and support for program and portfolio structures.
Tools that offer a tailored governance approach will ensure that templates can be created by the SPMO to suit projects of different sizes or different types of projects. The template should allow a project plan to be set up automatically with the appropriate governance elements automatically applied to suit a particular type of project. This not only saves time and effort for the project manager, but ensures the same standards are being applied across all project types. The ability to “bake” SPMO standards into the project tool means the project manager does not need to go looking for this information and knows what is expected. This has benefits later as well during project audits as the expected project information and governance is immediately available.
The ability to see key project metrics across all projects enables the investment decisioning capability I have discussed previously. In the same way, the tool should allow for risks and issues to be aggregated and made transparent. I discussed the importance of action tracking as part of disciplined execution. We recommend tools which facilitate a centralised and assignable capability for managing actions as many of these will be key to successful project delivery. This will allow the SPMO to take a more holistic view on key focus areas across the organisation. Furthermore, the ability to see and track benefits across portfolios, programs and projects will greatly enhance the strategic value that the PMO brings to the organisation.
Standalone project tools are not integrated with each other and therefore a real time, aggregated view of important project data is not possible. PMOs therefore rely on separate reports to be provided by project managers in order to assemble this information. This is not only an inefficient process but as we have seen, data provided in reports is inconsistent and often, inaccurate. For that reason, we recommend project tools that also offer integrated, easily customisable reporting that obviates the need for the project manager to generate a separate report. If a project tool is simple to use and supports the project manager in inputting the required information, the quality of reporting will improve as a result and with it perhaps, the morale of the project manager.
As we have seen in this paper, the strategic project management office has a key role to play in lifting the maturity of project delivery and optimising the business return on project investment within the organisation. To achieve this, focus needs to be given to people, processes, data and tools. Project delivery is a holistic exercise; both an art and a science. The game changing recommendations I have outlined in this paper cover all of these dimensions and I am confident they will serve you well on your journey to becoming a mature, value-adding project delivery organisation.
● Hobbs, B, & A, M. (2005, September) A Realistic Portrait of PMOs: the results of an empirical investigation. 2005 PMI
Global Congress Proceedings. Toronto – Canada.
● The Cost of Bad Project Management, Gallup
● Harvard Business Review. Why your IT project may be riskier than you think
● https://www.zdnet.com/article/qantas-airways-a-perfect-storm-for-it-failure
● Dr Bernard Terrill, Driving Business Outcomes in the New Normal (2020)
References
DDE Technology has many years of experience running major technology programs and change initiatives for companies around the world operating in many sectors. In addition to managing projects on behalf of clients, we also work with companies to drive internal change and optimise business processes. We work with senior management to create project maturity uplift through leadership development and training. We also recommend and deploy project portfolio management tools for clients seeking better returns on their IT and business project investment.
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