The rising importance of a PMO

May 22, 2018

With the market getting ever more volatile, development fast paced, competitive pressures intensifying and businesses going global, companies have begun to recognize the benefits of structure and guidance provided by a PMO.

But let us first clear up what PMO stands for. PMO has been mostly used to mean Project Management Office, but also Program Management Office and Portfolio Management Office, indicating the level on which these groups operate within a business. Generally speaking, PMOs provide support, mentoring, standardization and best practices in project management to ensure success and improve efficiency of undertaken projects.

There can be more than one level of PMO. Enterprise-sized organizations tend to have a PMO in each department and an Enterprise PMO (EPMO) to maintain standards accross departments and regions.

The rising importance of a PMO
J. Kent Crawford [1] describes the PMO levels the following way:

At level 1, the PMO provides the support for single project monitoring or the functional support for complex projects/programs and related control actions. Usually, this kind of PMO is called Project Control Office.

At level 2, we are talking about Business Unit Project Offices that provide support to specific projects of the business unit doing integration between projects of various types and dimensions. Conflicts not solved by the PMO have to be solved at the departmental management level.

At level 3, the PMO is used to select resources depending on business strategies using the definition of both the project priorities and the portfolio according to the strategy of the entire organization.

What are the responsibilities of a PMO?

While project managers focus on doing things right, PMOs are concernedd with doing the right things. The strategic role of the PMO and EPMO is vital. They are responsible for aligning the project portfolio to business strategy, navigating risk, driving benefits realization, enhancing governance and accountability, and managing talent. They identify the expected benefits of a project and strive to maintain them past the project wrap-up. It is considered that scope, time and cost are no longer enough to measure success, and that expected benefits are the missing piece.

Project Management Institute (PMI) reports that those that align their PMO to strategy, report 38 percent more projects meet original goals and business intent and 33 percent fewer projects are deemed failures.

In their 2017 survey of more than 3000 project management practitioners, PMI lists the prevalence of PMO roles in organizations, and makes a distinction between PMOs and EPMOs.
The rising importance of a PMO
[Taken from Pulse of the Profession 2017 | PMI]

The majority of participants report their organization’s PMO has a role in establishing and monitoring project success metrics and standardizing project management practices. This majority has grown from 60% to about 80% in the past 10 years, In about a half of surveyed companies, PMO actually deals with program and portfolio management and project resource allocation, although this last one is less true for enterprise-wide PMOs. EPMOs tend to provide more training than their department specific counterparts.

There’s growing attention to benefits realization management, that is, guiding implementation so that identified benefits are realized and sustained once the project ends. Thirty percent of companies report high benefits realization maturity.

But who needs a PMO?

If you are not a very small company, chances are – you do.
90% of large enterprises have a PMO
88% of midsize companies have a PMO
61% of small companies has a PMO

Overall, 71% of companies have a PMO and this number has increased by ten in the past decade.
The rising importance of a PMO
[Taken from Pulse of the Profession 2017 | PMI]

PMOs are particularly frequently established in healthcare, finance and information technology.

Okay. Why?

1. Increase insight into project performance
The rising importance of a PMO
As a portfolio gets bigger and variety of resources increases, it feels like the complexity of holding all the strings together grows faster than linearly. When a company is spread over a dozen departments, who knows exactly what work is being performed, by whom and how well? Sure, every department could give you a measure of performance for their project, but how do these measures stand against each other? Are we comparing apples and oranges?

A PMO provides standardization of performance measures which sharpens the blurry image of what is going on accross programmes, departments or perhaps continents.

2. Make project delivery consistent
The rising importance of a PMO
Inconsistencies in the way projects are managed make it extremely difficult to report on status and progress. Furthermore, inconsistencies make it difficult to learn from one’s mistakes and successes. Good PMOs insist on standardization of managing processes as well as adopting what has been learnt at project close or certain checkpoints.

3. Improve accountability
The rising importance of a PMO

One of the PMO’s roles is to ensure clear ownership of each project. While it may be tempting to back up ownership, practice shows that having one visible assignee yields much better results. If there is no one who feels it is up to them and them only to drive progress on a project or a task, chances are no one is going to do the work at all.

4. Increase efficiency and limit failures

PMI reports that companies that have well established PMO teams, meet their goals two and one-half times more often and waste 13 times less money than those without it.

That being said, a PMO is not a magic wand and cannot make a company infallible. The key word here is limit failures, rather than eliminate.

Setting up a PMO office is also not so easy-peasy, as it turns out. There is no one size fits all cookbook on how to build a PMO.

Peter Taylor, author of the project management book The Lazy Project Manager, talks about how it took 6 months to setup a PMO office and how it evolved over the period of three years, while working at Siemens PLM Software.

Some of the challenges that PMOs face include:

5. Align projects with business strategy
This is really crucial – the most straightforward way for a PMO to provide additional value is by providing strategic support.

Strategic results require strategic positioning, and successful PMOs have a seat at the executive table. They provide feedback to executives about performance, labor costs, and customer feedback.

Are all PMOs the same?

Project management offices can be classified into three groups:

The supportive PMO has relatively weak authority provides support through expertise, training, and information when PMPs are in need of it. This model is more common in less centralized ogranizations.

The controlling PMO supervises some or all aspects of a project. It participates in developing policies, promoting best practices, documenting project performance, and analyzing outcomes. It forces projects to use specific methodologies or policies.

The directive PMO is most often found in large enterprises. It is involved in all aspects of governing projects. The PMO itself takes over the projects and makes decisions on resource allocation, scheduling, scope, cost, and goals.

Why now?

The rising importance of a PMO
Ever more present globalization and internationalization continue to change businesses and projects and consequently corporate structures, bringing diversity management into play. The world is hungier than ever for innovaion, and innovation benefits from diversity. PMOs, especially in the IT environment, have learned that change management is a part of their business due to changes in their social environment.

Diversity refers to more than gender, age or origin, though these should be attended to as well. A great deal of project managers are not educated or attuned to cultural diversity, which can lead to varied levels of misunderstanding [2], and it has been emphasized tirelessly that project management stands on the pillars of communication.

Diversity is also about the backgrounds, experiences, life situations, history we live in, different cultural elements of the world.

The recent trend is to have several levels of PMO – disparate business and IT PMOs under the hub of an enterprise PMO. Gartner predicts that by 2021, 50% of large organizations will have integrated distributed PMOs into an EPMO to enable digital transformation.

Digital disruption has moved from an infrequent inconvenience to a consistent stream of change that’s redefining markets and industries. IT leaders report a dramatic increase in both risk tolerance and willingness to change, and have shifted their focus accordingly from risk avoidance to time to market.
-Gartner

Enterprises growing means more effort, more projects, intensified need for coordination. Having a portfolio with north of 200 ongoing projects is reality for some, and coordinating this massive amount of tasks and resources would be impossible without a PMO.

The world is striving to automate anything and everything that can be automated. Having standardized management processes, report generation, project closure or other is an inevitable step towards automation. Less time spent, more value created. And this is no longer an option, but the only way to stay competitive.

References

1. Crawford, J. K. (2010). The strategic project office (2nd ed.). Philadelphia, PA: CRC Press.
2. Obikunle, O. (2002). Dealing with cultural diversity in project management: a dilemma in communication. Paper presented at Project Management Institute Annual Seminars & Symposium, San Antonio, TX. Newtown Square, PA: Project Management Institute.

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