PMO projects fail. A lot. Why? Basically, it comes down to someone not delivering what they said they would. That individual may not think I was his fault. He might have recommend a firm to provide a product or service, and that firm goes out of business. The team members is not responsible for the firm’s demise, but was the firm’s finances examined? Many elements of failure can be predicted, but it’s always a trade off as to how much tracking can be done. Determining the balance between “good enough” and “everything possible” is a matter of philosophy and maturity. While different philosophy can start off a PMO at different stages, all PMO’s go through the same stages of maturity. Today’s Blog is going to look at the different stages of PMO maturity, how maturity it affects PMO operations, and what you need to do to get to the next stage!
Essentially, there are three states of PMO maturity. In the first stage, you focus on how well the PMO processes work. Most new PMO’s focus on the mechanics of project delivery (meeting project schedule and budget) while not tracking the delivery of project benefits. Sadly, most PMO’s mistakenly focus on the success of the PMO operation, not the project. The second stage focuses on the project and can report on whether it was successful or not. This is better, but it may still monitor only part of the value quoted in the project charter. PMOs in the third stage fully track and report on the value of the project, but very, very, few PMO reach this stage of maturity. Not surprising when you consider how few PMOs existed outside of construction and large industrial processes just a few years ago. Let’s break down the structure of each stage to understand how they work and how you can move your PMO to the next stage. Let’s start with stage 1 or…
PMO DELIVERY: New PMO’s have limited knowledge and limited resources. It makes sense for the PMO to focus on the “essentials.” However, new PMO’s make their first big mistake by assuming that the essentials are the project budget and schedule. If the project is closed on time, and under-budget, it must be successful. Right? WRONG! The reason the project was created was to obtain the benefits in the project charter. Let assume a project to purchase and install software that saves $1,000,000. Savings do not come from the addition of software; they come from the removal of… something. PMO Delivery focuses on additions: putting things in place (licenses, people, training, leases, etc.), and ensuring that deliverables are received. Few PMO projects monitor the project until the entire financial (or other improvement benefits) are received.
- Goals: If your PMO is new, it may be appropriate to focus only on the project schedule and budget. You need to these foundational elements to be properly performed before later stages can be successful. However, senior management needs to know if the project did what it was supposed to do. If your PMO does not monitor projects until the full benefit is delivered, should the can the charter include benefits occurring after the project closes? On the other hand, big projects requires a payback period, sometimes a very long period. On the other hand if a PMO does not allow for a reasonable payback period, you may have a very thin project portfolio. Verify your PMOs mandate, and then determine if you need to monitor projects into later project stages.
- Success Factors: You already know how to track the schedule and budget during the PMO Delivery stage. However, if the project “pays off” after the project is closed, you may want to consider three best practices…
- At the beginning of the project, have the sponsor identify how the FULL benefits will be measured and reported; ask to be included in the process. Track the percent of projects that generate these reports, post-PMO Delivery.
- At the close of the project, report the full cost vs. full benefit as stated in the Charter. Collect data for a few months, then produce a report for all projects. Are you monitoring 10% or 90% of the benefits? The answer may surprise you!
- At the close, provide the project owner with a specific template to report benefits. If you don’t do this, a report but be produced but it may not accurately track benefits. By providing a template, the project owner will be more focused on key metrics that will keep the project on track.
PROJECT EXECUTION: In PMO Delivery, we add elements. In Project Execution, we reduce elements. When our theoretical software project is in place, we would remove: old software licenses, redundant support fees, excess personnel, unneeded space, etc. If new revenue is expected, you need to verify that the revenue exists. Also, unexpected changes can occur after the PMO closes the project. Old and new software may be planned to run in parallel for three months, but if problems arise it may be for a year. Alternatively, a software update may alter functionality and reduce the effectiveness of the software. The longer the payback period, the greater the possibility that changes will occur to lower benefit.
- Goals: You need to understand total project benefits. Where do projects benefits come from? Are some savings really cost avoidance? Do they count as hard savings? Vacating a space can reduce costs, but not if the firm continues to pay for the vacated space? Understand common costs in your firm, especially employee costs. Reducing headcount is a real saving; not bringing in headcount that was approved (but not needed) is probably not a real saving. Likewise, moving “reduced” staff from one group to another may be cheating.
- Success Factors: The secret to success is the ability to track results. Don’t be surprised if the benefits in the project charter are not auditable. Many departments do not produce meaningful management reports. Here are some best practices to help you:
- Standards: Create a list of standards on what type of “benefits” are: hard, soft, and “not allowed.” Ensure that these different categories of benefits are not confused and comingled.
- Specific Benefits: The Charter should not say more than, “The reduction is $100,000.” It needs to say, “The benefit comes from retiring two contracts and eliminating one proofreader position.” Ensure that the project owner understands that the reductions must be supported by specific, agreed to, reports.
- Baseline: Establish a baseline at the start of the project, and compare it at the end of the project. Ideally, the report comes from third party: people, from HR; contracts, from procurement; etc. This process may reveal unofficial processes and resolve differences between reporting systems.
- Tracking Systems: At the start of the project, agree to the specific reports that will be used to provide data. Expect MAJOR differences in department and corporate reports (on headcount, contract payments, etc.).
- Specific Names: The longer it takes to deliver the full benefit, the harder it is to track results. Over the course of a year, the department may sponsor many projects, affecting overlapping staff, contracts, and resources. Double counting benefits becomes more likely with time. Therefore, you need to name specific: shifts, individuals, contracts, and other resources to ensure that you can track results.
PRODUCT PRODUCTION: The first stage was adding, the second was removing, and this third stage is… maintaining. As the PMO evolves, so too will sponsors. In order to show larger benefits, sponsors often extend the payback period. There is no natural limit for the payback period, but generally three years is seen as the maximum. After that, three are too many operational changes to easily track the original project. After all, if 14 months after you started your project you are getting a $10,000 a month benefit… why wouldn’t you want to extend that into infinity?
- Goals: Essentially the process is the same as in Project Execution, you just track it for a longer period. Rather than tracking every day, you may just “audit” every six months to ensure that the process is still working. Make your mantra, “If you can’t track it, you can’t count it as a benefit!”
- Success Factors: The longer the project runs, the harder it is to track results. A very important project with a very long payback period is the perfect reason to work with a department to ensure that their management reports are based on the right metrics and report these metrics accurately.
As your firm comes to understand the benefits of a PMO, you need to constantly evolve your organization so that the expectations for a PMO do not exceed your ability to deliver. Over time, project sponsors will look for ways to enhance the value of each project, sometimes trying to count soft costs, sometimes trying to extend the length of the project, sometimes taking costs that should have been addressed and moving them outside of the monitoring process. In the end, senior management is much less concerned about these details than they are about the tangible benefits they expect to realize. By agreeing to which benefits are “real,” by having reports that can track the delivery of benefits, and by the PMO continuing the monitoring function until the full benefits are delivered… the PMO greatly increases the benefits the firm will see. Not only are individual projects more likely to deliver full benefits, but your entire project portfolio will be more realistic in presenting assumptions and tracking benefits if all parties know that the entire life cycle will be tracked. Take a look and see which stage best describes your PMO, and how you can build towards the next stage. Because that next stage is coming! And that’s my Niccolls worth for today!