A Value-Driven Approach to PMO

1. Introduction

Ensuring project success is becoming strategic for organizations. So Project Management Offices (PMOs) must evolve in parallel to the change of paradigm in which project value is seen. In addition to the well-known operation, cost management, etc., traditional functions need to move towards value creation. Understanding the project value and coping with project constraints are therefore two key elements to put in place within PMOs. The acceleration of business competition and the demand for profit—shareholders, clients, partners—creates a context that is conducive to a shift towards project value. To meet these challenges, the empirical study shows that PMOs can also support value in another way by promoting strategic initiatives. New coordination functions to implement between the central and the local PMOs, or other centralizers such as strategic marketing departments, can foster the development of a bundle of strategic initiatives.

The central research question driven by the growing importance of such issues was to thoroughly explore and improve PMO practice. The three exploratory case studies could prove that PMOs can serve more and even more: a godsend effect is then developed if you design a PMO with a value metaphysical orientation! Moreover, the recent development of business in Europe shows that interest in the shift towards the value of products and services is part of an avant-garde, where some organizations believe that "value" is becoming their most strategic concept. However, although the relevance of value is interesting as a way to differentiate and compete according to "new" criteria, the link to the studies of projects and PMOs is not so systematically established. It is also very rare that academics seek to understand the PMO from a "value" point of view. PMOs play increasingly pivotal roles within complex project-based organizations but are struggling to prove commercial value.

2. Understanding the Project Management Office (PMO)

Understanding the Project Management Office (PMO) The term "Project Management Office" (PMO) is used to describe a wide range of functions that orchestrate project work in organizations. A helpful way to explore the PMO is to use the term functions since it is the term used to describe the core mechanism that supports corporate governance. In a broader context, we can talk about the project-centric approach in business—such as portfolio, program, and project management. This approach is the responsibility of a wide range of functions in an organization, such as consultancy bodies. In the narrow sense, we talk about PMOs and their functions in organizations. There are three types of PMOs: controlling, supportive, and directive. All have some sort of strategic fit with the organizational strategy. Directive PMOs are concerned with establishing the strategies to be followed in projects and are essential for earlier investment. In this context, it is important that the PMOs develop their knowledge and maintain tactical and some operational knowledge regarding the projects.

Project Management Offices (PMOs) are not a new concept. The use of a PMO to ensure successful project delivery has evolved in organizations due to the increasing complexity of projects and the realization of the need for management support. Ensuring project delivery is not possible without executive office support. The role of the PMO has been directed toward increasing project management capabilities. It started in the manufacturing sector, where the PMO ensured the delivery of maintenance and new installation projects, and then spread to organizations with large-scale projects where the increase in successful project delivery needed top executive commitment and support. PMOs are also a mechanism for communication between project managers and management. Some challenges regarding the PMO are that it is only useful if it fulfills the needs of the organization. Management has many other vehicles for strategic implementation available, so a PMO has to compete on the positive impact it offers a company. The PMO has to prove added value and support the organization in realizing its objectives and not just be another "office" that consumes corporate profits. The PMO's mission is aligned with the corporate strategy and then provides the strategic framework for project delivery.

3. Value Creation in Project Management

A question that is always raised when organizations invest money in projects or project management offices is "why should we invest?" However, this is not the right question to ask. The concept of value is fundamental to all activity within an organization. A key part of project management, and the purpose of project management offices, is to provide services that enable the business to realize value from the investments they make. The business environment is complex, and there are many things that can get in the way of actual project outcomes aligning with pre-project identical assessments. The role of the PMO and of the project manager is to apply a focused effort to ensure that the value intended at the outset of a project is actually delivered.

Value can be considered in many different ways. This can include financial values (how much will the project earn or cost the organization), technical values (how will the project empower the organization to do new things), and stakeholder satisfaction values (how will the project make the organization’s stakeholders happier). Value creation for project management and project management offices should be a key guiding principle. Indeed, this fundamental concept is referred to in a number of places. The concept of value in relation to the business need is also discussed. Their work regarding incremental value (realized incremental benefits) is described further in this text.

4. Challenges in Traditional PMOs

Traditional PMOs are struggling to deliver value to organizations. With their strong focus on governance, using 'one-size-fits-all' project management methodology and following an administrative tick-box approach, they are often seen as too focused on process and a series of bureaucratic hurdles that waste time without adding value. Traditional PMOs typically struggle to gain full commitment from the teams to follow processes and standards and ensure quality. This creates a PMO value gap. Measurement and reporting against process adherence tend not to help in delivering the PMO message, nor do they tend to be aligned to business needs. This often means that the PMO cannot easily evidence any contribution or value that they bring to their senior management stakeholders. As the dynamics of business are changing, we are in the age of organizations that need to be agile. Agile creates a number of challenges that traditional PMOs tend not to be able to respond to, as the best practice adoption of a traditional PMO in the delivery life cycle may not be appropriate.

Traditional project management methodologies involve excessive cost controls to reduce variances in projects and report on fixed budgets; this has been stated as a reason for project failure. By not allowing flexibility in value measurement of the project rather than the progress of the project in the delivery phase, their endeavor might result in the delivery of negative value to the organization. The time has come for PMOs to change and transform. If they continue as they always have, they will find their value is dropping as the need and purpose to which they were created is changing around them. The Value-Driven PMO, as it is called, while simplistic in concept, is extremely hard to achieve, primarily as it is a culture that has to be developed. It has evolved from a traditional PMO and a 'blue sky' PMO to see itself as a light touch and nimble way of adding value to an organization.

5. The Evolution of PMOs: From Administrative to Value-Driven

Since their inception, Project Management Offices (PMOs) have evolved from predominantly staff units to centers of expertise, somewhat mirroring the broader services industry paradigm shift driven by the quality movement. They have served many different functions, but most often as some form of control over projects and project managers. The most significant change driving PMO activities has been from interdependent and relatively stable contexts to complex projects in markets demanding constant innovations. Since the mid-2008 period, "agile" has become top of mind for the globe’s senior executives’ focus and investment, adding to this backdrop. The realization that enough certainty cannot be engineered from an uncertain strategy and development in and around a volatile, uncertain, complex, and ambiguous (VUCA) world is also influencing the focus of PMOs today. When dealing with a VUCA world, plans are insufficient – you need to be adaptable to fit these volatile curves.

The modern prevailing mindset appears to be that, whatever the type of PMO, they must enable the collective success of organizational project efforts, which need to align with the organization’s strategy. There must be a step before any of these data collection and service models, and that is the "why." Here one can see reflection on the adaptive competence framework and practice. Additionally, it can be seen that thinking of constant change and flux (agility) sets the adaptive advantage as a constantly moving goal post. To be a socially strategic PMO, in essence, is to potentially have two value propositions: dynamic resource reallocation combined with effective organizational value realization tracking that constantly feeds into a highly adaptable whole of organization process that makes a market-benefited change that is adopted and realized. That is where it changes the game – the focus shifts from the projects being done to an organizational capability built by linking strategy to operations through greater adaptability.

6. Key Components of a Value-Driven PMO

To realize a value-driven PMO, several components should be addressed that together work to set up a roadmap on how to establish such a PMO. These building blocks should be in place when enhancing a PMO from a more traditional, execution- or control-oriented setup to a value-driven one. First, a value-driven PMO should always ensure that its activities are aligned with the strategic objectives of the parent organization. This requires a clear understanding of what the strategy is and which PMO activities directly contribute to the realization of the desired objectives.

Second, value-driven PMOs capitalize on existing governance and look for better alignment through optimized frameworks. Project, program, and how to manage those from a portfolio view should be defined, but also the way benefits are identified, assessed, and tracked. Third, value-driven PMOs engage with stakeholders to understand their different perspectives and reflect in a way that is acceptable for all parties. These discussions support an organizational perspective of benefits and link individual projects to a wider perspective. It is important that a value-driven culture is in place, in which the dissemination and understanding of value management are apparent and clear for all stakeholders. Stakeholder engagement has shown to be highly important, whereas the latter is far from obvious in our society and organizations. Fourth, value-driven PMOs look for maximum efficiency and effectiveness, focusing on both the what and the how of doing things. The what focuses on governance and framework adoption, while the how is about technology and processes, embracing the need to move into a higher maturity level of these efforts. Most organizations get stuck here due to a lack of focus, strategy, and commitment to embrace this ongoing journey to the end of it.

Finally, leadership should embrace a judgment-call culture that empowers its workforce to think, innovate, and contribute in a meaningful manner. It means it provides the right culture, environment, and not to forget money. There is no one size fits all approach, and the business drivers of PMOs differ from one company to another. It is up to the organization to decide how far the value-driven concept should be implemented and to show the clear added value of each implementation step, as all components combined will make a difference and warrant a more extensive implementation.

7. Alignment with Organizational Strategy

Do you understand how organizational alignment can help project managers, functional managers, and individuals work more effectively in their particular environment? Well, that is the reason I have included this separate section. This chapter provides an overview of concepts that are fundamental for developing the basic understanding necessary to know about organizational alignment.

Each business unit has a strategic intent, a reason for its existence. Corporate strategy at the highest level drives the strategy of each individual business unit all the way down the line. But there are times when individual business units must be allowed to operate independently of the corporate strategy to perform functions that would be hampered by it if aligned with these strategic initiatives. Find the common links between these bypassed functions and the strategic initiatives, and the company’s employees set off in the right direction by the values that drive the company toward aspirations and excellence. Corporate strategy aligns all business units with each other. These same business units have their strategies, strategies that drive their operations and tactics, usually set at functional levels. Values that are the same at all levels and corporate strategies aligned with subsidiary strategies facilitate this alignment and integrate bidirectional information flow so that each business unit has the information necessary in order to understand the other business units’ strategies and to recognize how each unit’s strategy fits in with the corporation’s strategic initiative. This chapter provides:

8. Establishing Clear Metrics and KPIs

Metrics and KPIs are one of the executive management views in terms of how an organization is performing against expectations. The value guidance provided to the PMO, its projects, and the business are documented in the project charter and business case, as well as in the competency of project managers and executive sponsors through training. Value realization is a highly developed organizational capability with significant metrics and KPIs linked to value drivers. The PMO benefits through the provision of differentiation and competitive advantage from superior capabilities. Measures of project success or failure are important, but a value-driven approach to PMO's continual stream of benefits from project deliverables is a more important indicator of where a PMO and its projects add value. There are four levels of measures organizations need to adopt to promote successful delivery, identify savings, maximize benefits, and embrace a culture of proactively contributing impact to organizational strategy. PMOs at a base level track cost, schedule, and quality through project delivery measures and then assign accountability for realization of forecasted benefits. KPI measures are then presented to management at month-end, quarter-end, and year-end to compare actuals against budget, forecast, and goal or target. A third level moves beyond business process effectiveness to again drive more significant performance outcomes to deliver organizational goals and competitive advantage. The ultimate level is to maximize competitive advantage through superior project and business performance that delivers sustained value. Through analyzing business performance, it reveals the best opportunity identification and capture, resulting in sustained value contribution. At this level, benchmark and comparative data contribute to sustained business improvement value.

9. Building a Culture of Continuous Improvement

After investing the time and money to create a PMO that is established to deliver business value, many organizations believe that governance and program management processes will be consistent over time. Indeed, they often implement a PMO without truly preparing the organization through communication, training, or the implementation of practices that allow the PMO to be successful in the short term. Others define PMO procedures—all of which are value-adding—yet are not rationalized in line with the overall strategy. The PMO quickly becomes, quite paradoxically, the police, rejecting proposals rather than moving the business toward a direct strategy.

Remember, the governance framework exists to monitor if the strategy is value-driven. Any project is, at its extreme, launched to correct a client need while, at its minimum, delivers minimal business value. The portfolio exists to ensure that the organization applies the strategic compass to project groupings in a practical manner. The very nature of the program requires some policy, control, and investment discipline. Your PMO has all this built in. If the business value exists, driven from clear strategies that support the primary objectives of the business, then why isn't this enough? Why do you need to change? Only for the pursuit of continuous improvement.

10. Leveraging Technology and Automation

Organizations can enhance the value derived from technology investments through the PMO. Applying technological solutions and automation through the PMO to support projects and interact with the PMO provides several benefits: increased productivity of project managers. Over time, portfolio management processes can be encapsulated into various tools. The disruption and cost of constantly updating, integrating, customizing, and migrating from one platform to another may outweigh the benefits of new features. Automating processes requires careful change management to ensure it is as effective as intended. Unfortunately, people do not always understand the need to oversee the process and appreciate how the process is actually going. Effective implementation of automation requires targeted change management that provides transparency into the process and informs the affected employees of the implications.

The PMO, in particular, is taking IT control to the regulators. More prescriptive regulations and a focus on maximizing the impact of scarce resources are leading to a growing emphasis on prioritizing and managing IT expenditures. Even though the PMO has been expanding both its scope and level of maturity over the years, many organizations still do not use the tools it provides for such IT expenditures. The PMO has access to a wealth of data to help improve IT cost management, regardless of who is responsible for the P&L. A PMO provides appropriate inventory and project information to help prioritize resources on projects with new regulations or provide explanations for past performance spikes. Furthermore, by automating the processes, the PMO can reduce human error and costs, operate more effectively, and aid the organization's ability to better manage IT at lower costs.

11. Developing Talent and Skills

Developing talent and skills is a continuous process, especially with the growing needs of organizations. Hence, PMO heads should keep the team at the cutting edge of knowledge and trends. Investing time and money in training keeps the team highly motivated and helps retain talent. Besides training for PMO operations, it is typical to look at soft skills and technical skills. Working with HR and other training partners, assessing the team’s training needs and designing programs for the same would-be part of the job of the PMO.

Team rotation and leadership grooming should be promoted within the PMO to increase depth and breadth within the organization. This also helps in developing a new set of skills, building the next level of leaders, and making the organization less dependent on a few individuals. While it is important to respect and value the present set of skills in the team—so they do not feel replaced or threatened—a continual process of developing new skill sets is essential for the continuity and growth of the function. Given the nature and intent of the PMO, much of the training programs will need to be on the job. The PMO will need to incubate training needs at various institutes and mentors who can work with the team as and when required.

12. Effective Communication and Stakeholder Engagement

The burning platform is often used to communicate a sense of urgency. Those setting up or redesigning a value-driven PMO will need to define and communicate their business drivers first to the persons or groups who will be their primary clients and stakeholders and understand from them who else will need different types of engagement throughout the project, program, or portfolio lifecycle. Particularly for a PMO that spans many business units and influences company strategy, setting up an engagement model will be important, as it is difficult to satisfy everyone's needs, and more problems can be created by optics if this does not work well, particularly if it looks like one part of the business is getting 'special treatment.'

Once the primary clients and stakeholders have been identified, you can have the first interaction by starting in the middle of the conversation. Start by summarizing the top objectives of each project, program, or portfolio they are interested in, as they would in any business case: what are the expected benefits in terms of positive and negative impacts? Include any information on costs, the timeline, critical dependencies, and performance measures, and whether the expectation is that those initiating and delivering each will be able to justify any changes that might keep them from reaching these targets. Be sure to use terms that the clients and stakeholders understand.

The conversation this will prompt will give you the information required to define the added value that the PMO needs to deliver, which you can then show in a value proposition. The value proposition will require preparation and document presentation. Use them to ease client and stakeholder concerns and establish what will be measured to know whether the PMO is delivering to their expectations.

13. Case Studies and Best Practices

We recently published a book that tells the story of the Des Moines PMO. The Des Moines PMO is an unapologetic business-based project management office whose mission is to help deliver world-class business results through disciplined and facilitated internal project management, with a strong emphasis on out-of-the-box thinking, cost efficiency, and customer satisfaction. Putting the rebirth of their ailing company ahead of any personal rewards, some brave executives known as the Topilots accept the daunting task of creating a project management office that they believe would be both indispensable and immune to corporate politics. The author uses a parable to distinguish this new approach and presents the fleshed-out model with illustrative real-life case studies that demonstrate the application of the Value-Driven Project Management approach.

Successful initial planning and implementation of a PMO help in its full development. The Des Moines PMO and ACP's PMO both started as change management programs that used project management to ensure that changes were successful. Only when the business value of disciplined project management was established and well-recognized within the organization were the PMOs established as the corporate engine for project management. Not all projects were managed within the Des Moines PMO framework, but within ACP, project management was the function of the PMO with its own staff of project managers, and the need for this function was recognized in scope and schedule estimating for all company projects, regardless of size. I was extremely impressed by both organizations. They are in the vanguard of organizations that have recognized the benefits of disciplined project management for the company enterprise.

14. PMO Maturity Models

It seems that a majority of articles, books, and presentations on PMOs include some mention of the Capability or Maturity Model. There are numerous PM and PMO Maturity Models to select from.

I've noted that there is a subset of PMO Models that focus on the selection and responsibilities of PMO positions along with the services offered, with little or no references to maturity or capability.

When it comes to PMO Capability or Maturity, there is a broad model that overlaps the four main categories of people, process, technology, and governance. This model includes the four critical areas and phases of ad hoc, evolving, operationalizing, and optimizing. While the Maturity Model is useful as a measurement tool and referring index to establish initial baselines and determine growth, make sure you don't abuse the use of the term maturity, as it may generate counterproductive resistance.

15. Assessing and Measuring PMO Value

PMO value was once a simple concept, measuring the PMO's presence and participation in the delivery of the project intending to wind up. You could easily identify the PMO's role when you saw it. PMOs used to be responsible for the creation and management of the project plan. They used to be responsible for the production, storage, and protection of project-related documents. They used to be responsible for the coordination or facilitation of project status. With the evolution of portfolio management, PMOs shifted their support to higher-level decisions related to business strategy. The work of the PMO changed to reflect a focus higher in the organization. We have seen several PMOs actually expand strategic roles within their organizations' portfolio governance models.

For PMOs to reach new value highs, they have to constantly assess and measure their value. Picking the right performance indicators can be difficult, especially for strategic PMOs. Traditional PMOs focused on data collection and compilation to publish basic project status. Metrics often do not differentiate among PMO roles. Today's PMO could: measure how specific management analysts contribute to the portfolio management process; measure how much change management resources positively affect project success rates; measure overall cost and how many other project costs management analysts help influence PMO involvement in priorities.

16. Implementing a Value-Driven PMO: Roadmap and Strategies

This will be explained step by step on how to co-create a value-driven PMO with your business partners. Co-creation is a participative strategy that enables project management practices to be tailored to the specific unique needs of your business constituents. In moving forward with implementing a PMO, look at every new request from your business partners through their eyes to see if they don't already have what they need. Listen to their concerns and address each one in the conceptualization and design of the PMO. Relentlessly seek feedback, involvement, and partnership as you build your PMO. The PMO already exists as an organizational attribute, so why recreate another one? Instead, focus on delivering the PMO governance, services, and outcomes that fulfill the specific expectations of your business partners. Keep business partners engaged and focused on achieving PMO objectives, not concerned solely with implementing PMO processes.

It is important to realize that PMOs evolve over time and often fail because they become fixed in place. The working assumption of the PMO is that it is developed for a given duration, but also that it is designed in a manner that we continue to monitor and assess PMO performance and outcomes, and then realign or redesign it as our business partners' needs change. To the extent possible, PMO governance, its core services, and project management standards are subject to monitoring, assessment, and continuous review, ensuring standards that work and fulfill our business partners' needs. The more co-creation that occurs, the more the process becomes seamless, and once we and our business partners are down this path, continuous change is not such a scary prospect.

17. Change Management and Overcoming Resistance

Change Management Change management is an important function resulting from the implementation of the PMO. The establishment of standards or the improvement of communications, leadership, and project management skills can impact significant changes in an organization. However, some changes may be even more significant and directly impact someone's livelihood. A PMO exists primarily to elevate the project management standards of an organization. If these standards do not meet the needs of the organization, meaning additional work for functional managers, it is not only difficult to change but also represents an impending disaster in the eyes of the functional managers.

Overcoming Resistance to Change A project manager is typically in charge of the resources needed to accomplish the project. A project manager will never have sufficient resources to accomplish the project objectives or all the needed resources in-house. The project manager has to face these constraints and develop a way to accomplish the project objectives. However, the existence of this hurdle does not prevent the functional manager from resenting the project manager for not providing these resources. The staff members transferred or told by the project manager what to do might resent these actions. The simple solution for implementing change is to overcome resistance. However, it is often not that simple.

18. Sustaining Value and Adaptability in PMOs

How can a PMO reliably generate and sustain lasting value over time? Many PMOs suffer from an early pattern of value as they are first deployed. They then struggle to maintain this level. Alternatively, PMOs depend largely on their staff to generate their value. So when these staff move, so too goes the PMO’s value. Your PMO will have the greatest ability to effectively support the enterprise only when it can do so through the systematic provision of services that have been designed to support the life cycle of every investment project through to the useful support of a benefit. The value model can assume that services are provided directly or indirectly by PMO staff or via third-party staff, software producers, licensed tools, and competent partners.

In the main activity type phase of the scenario, PMOs support the enterprise as its emphasis moves through its business strategy demonstration phase, project start-up and project information planning, business benefit change demonstration, investment case approval, program and project set-up, construction and handover, benefit realization, and program and project closure activities. During key staff role or evolution phases, PMO support is directed at the business sponsor, the project owner, the program sponsor, the project managers, and the project delivery team. At the type of phase, PMOs need to forge their own continuing service development plans to address a balance between the anticipation of this demand and the provision of services that are not pushed back by a shortage of staff or capability. How well your PMO performs in the essential management support activity types will significantly influence the level of global vendor demand for the PMO services provision role types. To sustain or increase the essential management support activity types, concentrate the PMO capability and service in the business strategy and project delivery life cycles across the existing portfolio.

19. Future Trends and Innovations in PMOs

What does the future hold for PMOs? We predict that steering PMOs will be the preferred type of PMO to support the business in delivering its strategies, allowing project excellence and innovation to be transcended. Steering PMOs will help boards understand what is involved in the process of successful project-based business delivery. What are the innovative PMO trends that are already being experimented with? Over the past 15 years, we have been part of at least half a dozen value-driven initiatives and have observed a variety of experiments. These have led to a few directions that are worth exploring for potential deployment. They are steering PMOs; using social media dashboards to visualize project management information in PMOs; new methodologies; rolling wave planning; resource capacity planning; holistic product portfolio management; end-to-end project insurance; and benefits-invested governance. Is there anyone using PMOs to map between strategy and project approach? Yes, we have observed such cases and this report is based on a lot of study and research into them. As a result, a lot is now known about how such PMOs can help their executive teams secure good decision-making and delivery capability. The financial benefits derived from successful projects and programs continue to interest senior management. Is it any wonder that PMO innovation continues to hold a strong appeal?

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