Is it Time to Rethink Your PMO

Projects are the usual mechanism through which funding for information technology (IT) investments are channeled, resources assigned, work structured and activities scheduled and managed to deliver investment objectives and business outcomes. Given that an organization is likely to have many projects running at any one time, a PMO is often established. While establishing a PMO might be intuitively appealing, the reality is that a lot of PMOs are ineffective while othershave struggled to gain traction.

The current COVID-19 pandemic has shown a light on many PMOs and caused leadership teams to pose some fundamental questions about them. Over the last 8 months we have conducted 2 surveys, one pre- and one two months into the crisis.[1] The first revealed that just over 50% of those we polled reporting that their PMO does not add value, or is not seen as adding value, with a further 10% not sure as to whether it does, with these statistics creeping up for our second survey 6 months later. Our analysis suggests that, in their current guise, many PMOs are unlikely to survive the pandemic.

In this article we present a sense-making framework to assist a leadership team in assessing their PMO, what it does and to determine whether this aligns with their expectations. The objective of this framework is not to suggest one best type of PMO but to provide a lens to facilitate a conversation about an organization’s current PMO and to provide the basis for an evaluation as to whether it is the kind that will meet expectations and achieve what is demanded of it.

The ambiguous nature of the PMO

One thing is clear when you begin studying PMOs is that they are all different and the range of PMOs presents a confusing landscape. They come in various shapes and sizes and with differing remits, authority patterns, position in the organization and reporting lines. Some merely collate performance data across multiple projects, particularly data related to cost, progress and resources consumed. Others are more intimately involved in guiding projects and see individual projects as being part of an overall portfolio of investments that must be optimized. We have seen PMOs involved in making funding ‘gating’ decisions with a remit to stop what they evaluate as “bad projects” as they look across the overall portfolio of project. Sometimes, companies establish a temporary PMO for a large initiative, such as a major IT re-platforming program or to support its digital transformation ambitions. Individual business units or business areas can also have their own specific PMOs, a more permanent structure.

Indeed, the label PMO itself is very ambiguous. It can simultaneously mean Project, Program, Portfolio, Product or Performance Management Office, depending on who you are speaking with. In the survey of PMOs that we undertook, 64% of organizations reported that the P in PMO stood for project, program in 42% of organizations, portfolio in 29% and product in 2%. 4% reported that ‘it varies’ while the remainder did not use the label PMO per se, but had “Change Management Offices” or “Digital Transformation Offices” and saw these an analogous to a PMO.

While it might seem counter intuitive, our research indicates that there is no correlation between having a PMO and project success. There is already research that has identified a reduced level of management satisfaction associated with the presence of a PMO.[2] While the presence of a PMO is likely to be associated with increased use of methodologies, adherence to methodologies is not an indicator of the achievement of business outcomes: delivering successful projects is not analogous to achieving business outcomes. What is clear is that it doesn’t matter what a ‘PMO’ is called, rather there is a correlation between what it does and both project and overall portfolio outcomes.

Making sense of your PMO

In Figure 1 below, we present a sense-making framework to aid a leadership team reflect on their PMO [3]. It provides a lens to analyses a PMO in respect of its role and orientation. It is not meant to be prescriptive, rather to fuel a discussion. Moreover, there is no “best” position to be in the framework, it is context dependent. For example, in some companies having projects managed by accredited project managers following a recognized project management methodology and consistent reporting of project progress against schedule and cost can be very beneficial. But such organizations should also be aware of the limits of this type of PMO.

As the framework indicates, PMOs can have either a ‘supply’ or ‘demand’ orientation. A supply oriented PMO focuses essentially on input resources necessary to deliver a project and their utilization. It also emphasizes policies, templates, standards and methodologies. In contrast, demand oriented PMOs stress the achievement of expected business outcomes, whether from one project or multiple projects. The project itself is merely seen as a means to an end, with achieving organizational change being the usually requirement for a successful outcome

Figure 1 A sense-making framework for PMOs.

The role of a PMO can be considered as either ‘operational’ or ‘strategic.’ Operational PMOs undertake enabling and supporting activities for projects and are concerned with the performance of individual projects. They emphasize carrying out tasks that enable the project to meet time, cost and quality targets. These PMOs also stress adherence to policies, standards and methodologies.

A PMO with a strategic role focuses on overall input resource quality and utilization and the optimization of the overall investment portfolio within an agreed risk profile. This can range from the strategic management of resources that will be used in projects to being involved in prioritization and funding, supporting the selection of future projects by providing measures to rank potential projects according to their value contribution to the strategy.

Using this framework, we can explore a PMO in the context of what it does. The PMO in each category is also underpinned by particular assumptions.

Operational-Supply: This category of PMO strives to support the achievement of successful project delivery. They have a strong administration emphasis, collecting and collating information, typically time, achievement of objectives, cost and quality from individual projects and reporting on them.  They’re the keepers of best practices, project status and direction — all in one spot. Adherence to prescribed methodologies, tools, standards and policies is seen as critically important in reducing the risk of delivery failure and compliance to these is monitored. Even though this might not be the most effective way, very often you can find this type of PMO located either in the IT unit or a Finance Department. By nature, this always puts the focus on monitoring resource utilization, budgets and actual costs. The assumption is that project success is determined by adherence to methodologies and using defined tools and templates, sticking to the project plan and building the specified asset.

Operational-Demand: PMOs here emphasize securing the benefits and business outcomes of individual projects. The assumption is that the achievement of benefits requires their active management, consequently, they are tracked. Strong emphasis is placed on having a realistic business cases at the outset that clearly articulates the expected benefits from the investment and how they will be delivered together with strong stakeholder buy-in before commencing any project. Successfully delivering on a project is seen as a means to an end rather that an end it itself. The assumption is that expected benefits must be actively managed for them to occur.

Strategic-Supply: PMOs in this category are concerned with the optimum utilization of organizational resources. This is often the case when the PMO is seen as a “shared service.” Resources are tracked to ensure that they are being used in the best possible way, best practice is captures and shared and the PMO keeps track of lessons learned. The competence and skills of project managers are also developed by these PMOs. Most often, a pool of project managers reports directly into the PMO with a dotted line to the project sponsor. The assumption is that input resources should be managed strategically to ensure their quality and allocated in an optimum way.

Strategic-Demand: PMOs in this category are concerned with optimizing the overall return from the set of investments. They are typically involved in prioritization of investments as well as enabling their successful delivery. The more mature PMOs in this category also ration capital via a funding model that is more akin to a venture capital company than a traditional corporate budgeting process. Given their focus, PMOs here can stop a project, even if the project’s steering committee is happy with progress; in taking a portfolio perspective, move value is deemed possible elsewhere. The assumption is that projects are a vehicle for investment funding and need to be managed as a portfolio and the concern is overall portfolio value not that of individual projects per se.

What is the signature of your PMO?

While your PMO might fall neatly into one of the four quadrants, it is more likely to exhibit some characteristics from one or more of the other archetypes. It will, however, have a dominant signature, determined by forces pulling it in one of the four directions. While typically those PMOs with more of a Demand orientation do exhibit elements of Supply, the opposite is not the case. Similarly, those with a Strategic focus will also have some Operational aspects.

To begin to make sense of your PMO, assess it against the criteria in each of the four quadrants. If, for example, your PMO has an Operational-Supply signature, it is likely to be primarily an administrative entity, perhaps even seen as a “methodology cop,” checking that projects managers are following a prescribed approach and that all reporting documents have been prepared and filed. As budgets trickle down to projects, these are managed as individual endeavors by project managers and are expected to completed as planned. The PMO captures data from all these projects, collates it and reports against budgets and schedules, usually on a monthly basis. In most companies, such PMOs typically sit in the IT organization and aim to deliver a workable system to budget and schedule. In contrast, PMOs with a Strategic-Supply signature will take a more strategic perspective of input resources, ensuring their quality, looking to optimize their utilization across all projects. Capacity planning is often a key discipline and the PMO often acts as a center of excellence for project management too.

If the PMO has more of a Strategic-Demand signature, as well as optimizing the overall portfolio of investments, it will usually also emphasize the achievement of expected business outcomes of individual projects (an Operational-Demand signature). Such PMOs usually sit outside the IT organization and are seen more as being more business focused than the traditional IT PMO. The more effective report directly into the CEO and are usually the vehicle for strategy execution.

Having determined the signature of your PMO, debate whether it is (i) what you want and (ii) delivering what you expect. If it is not, look to where you would like your PMO to move towards, define the dominant characteristics and plot a route to get there.

In our survey, providing administrative support, collating and reporting project status, and providing standards, methodologies and project management tools were by far the most reported services. Management of project documentation and enforcement of standards also appeared as something attributed to a significant number of the PMOs we surveyed. This suggests that the Operational-Supply signature dominated our sample, a PMO that is more administrative focused as opposed to a PMO that sets out to optimize the overall return on investments.

Towards a Value Management Office

Remember, it not about having an entity that you label a PMO that matters, it’s what it does that really counts. However, we believe, given the ambiguity surrounding the concept of a PMO, that the label Value Management Office (VMO) is more appropriate for an organizational unit dedicated to overseeing the organizations portfolio of investments. It also sets the right tone, with the achievement of ‘Value’ as the ultimate objective rather than resource management or project delivery. It also shifts the emphasis to investments, with projects merely seen as the vehicle to channel funding, with such funding tied to an expected business outcome. We have come across a number of organizations that have established what they call “Mission Control” units that are analogous to our concept of VMO.

Figure 2 Positioning the Value Management Office (VMO).

It is likely that a VMO will have a signature that sits at the nexus of all 4 archetypes but with a clear pull from Strategic-Demand (see Figure 2). In taking a strategic perspective of investments, it seeks the optimization of overall portfolio value and use of resources. It may choose to also build the organizational capability to deliver successful project outcomes, a more Strategic-Supply position. To help with ensuring the success of individual projects, the VMO might prescribe methodologies and emphasize a benefits realization approach, an Operational-Demand position.

Successful VMOs will require strong leadership and active engagement from the C-suite; Strategic-Demand is the realm of the executive leadership team. This is why it can be difficult to get them established, particularly when executives are unsure as to what such an entity can achieve and what their role is in their success. Our survey revealed that only 11% of PMOs report directly into the c-suite, 54% the second management level and 29% report three levels down.

Surviving the COVID-19 pandemic

In our conversations with executives and PMO leads we get the sense that those with an Operational-Supply signature are unlikely to survive the current COVID-19 pandemic. Many have already been furloughed. Those with an Operational-Demand footprint have a chance, but challenges in the overall portfolio can see these struggling into the future. Perhaps surprisingly, PMOs with an Operational-Strategic signature will likely continue for the duration of the pandemic as organizations look to manage their cost-base and input resources. But once it comes to an end, the advice is to shift to a more Strategic-Demand signature.

About the author:

Joe is Non-Executive Director at Auxilion, part of the I.T. Alliance Group.  Working between Europe and Boston, Joe researches, teaches and consults in the domains of IT leadership, digital strategy and innovation, the execution of digital transformation programs, the creation of value from IT investments, and in the role, structure and capabilities of the IT unit in contemporary organizations. In an environment where hype is all too commonplace, Joe helps business and IT leaders make sense of it all and navigate an appropriate route through what is an increasingly complex landscape. In his research he studies contemporary issues and challenges that managers face in an environment of accelerating technological change. While his research is academically rigorous, Joe’s recognises that managers want frameworks and models to help them understand their own predicaments, insights to figure out options and consequences and clear actionable advice and guidance. While the majority of academics write articles for promotion, tenure and academic prestige, Joe writes to help the busy manager and executive to be successful.

Findings from his studies have been published in leading journals including California Management Review, MIS Quarterly Executive, European Management Journal, Journal of Information Technology, MIT Sloan Management Review, and Harvard Business Review. His most recent books are Taking the Reins as CIO: A Blueprint for Leadership Transitions (with Tony Gerth; Palgrave Macmillan, 2020) and The Strategic Management of Information Systems: Building a Digital Strategy (with John Ward; Wiley, 2016).

Further reading:

Does your PMO need a vaccine?

The current COVID-19 crisis has shone a light on many Project Management Offices (PMOs) and triggered leadership teams to seek support from entities that they have supported and funded over the years. While there’s no definitive playbook for how to plan and manage projects effectively, given the constraints of the pandemic, nonetheless senior management teams are looking to the PMO for guidance and direction.

For those PMOs who are struggling to step up, some fundamental questions are being posed including whether there is any value in having a PMO at all? Our analysis suggests that, in their current guise, many PMOs are unlikely to survive the pandemic.

Read more by Terence O’Donnell, Projects & Consulting Director at Auxilion here.

[1] The first survey looked at various functions and services of the PMO and polled 75 PMO Managers and ‘C-suite’ leadership on their views as part of a seminar on The Emergence of the Value Management Office (held 26/11/19). The second survey targeted a similar audience to assess their views on the relevance of the PMO in a Post COVID-19 era (06/06/20).

[2] J. Ward and E. Daniel, ‘The role of project management offices (PMOs) in IS project success and management satisfaction’, Journal of Enterprise Information Management, Vol. 26, No. 3, pp. 316-336.

[3] An early version of this framework was developed with colleagues from Cranfield School of Management, UK.

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