PPM: Everyone Gets To Play (Part 2)

In continuation to my previous blog post, this one will explain how the PPM needs of organizations drive the overall implementation process. At the enterprise level, we all recognize that different types of businesses execute different types of projects. The project portfolio for an investment bank is going to look a lot different from the portfolio at a company that designs and builds computer products, or a hospital, or a university. Even when we look at similar enterprises, we find differences in strategy, culture, and approach. Since many of these differences are the fuel for competitive advantage and operational excellence they require processes and practices which support those unique attributes.

Likewise, we need to recognize significant differences between functional areas  within the same enterprise due to the nature of the work being executed and the varying ways in which that work is done. The PPM needs for the product engineering groups are not exactly the same as those in HR.

Let’s take scope management as an example. For a company that is building something under a contract for another company, control over the scope of the project may be critical to assuring company profitability and in the most extreme cases the financial viability of the supplier organization. In this case, one would expect a much more structured, formalized set of processes for reviewing and approving scope changes and making changes to supporting contracts, payment schedules, etc. By contrast, when a department in one organization needs to communicate and manage expectations around delivery dates and costs for a sponsoring department within the same company – especially when the sponsoring department has requested the change — they may adopt a less formalized, lighter weight scope change process. In both situations changes the “what” of scope management is the same – scope changes need to be recognized, communicated and approved – but the “how” may be radically different.

We must also take into account that the approaches, tools and techniques used, even within a discipline may change over time. For many years, the construction industry used the Design/Bid/Build phases in their projects where each successive phase was substantially completed prior to the commencement of the next and each phase was executed by different organizations. Unfortunately, as a consequence of this approach many projects were plagued by a fourth phase, “litigation”, with finger-pointing and lawsuits between the parties to establish whether something was a defect in design or a defect in construction. Now many construction projects are using an approach called “Design/Build” where the work is performed and managed as a single, integrated effort. Similar changes have occurred in information technology, where new development tools and approaches have facilitated iterative and agile development of applications and business systems outside of the lockstep waterfall techniques of the past. Each of these has required new techniques for how the projects using them are planned and managed without losing the visibility needed for oversight and control of the outcome.

The most successful PMO’s and ePMO’s are those that understand the underlying goals and objectives of PPM while implementing supporting processes that are adapted  to the unique, changing needs of the enterprise, and the functional groups and disciplines within that enterprise. While this requires open-mindedness and creativity the adoption of PPM across multiple disciplines in thousands of companies is proof positive of the feasibility and be benefit to be derived from the effort. In short, despite the declaration of that gentleman at my first PMI meeting – PPM is relevant to Information Technology. And  to Finance, Marketing,  Professional Services,  New Product Development, Manufacturing, Supply Chain Management, Education and any other discipline or organization that invests in and executes projects. It also still applies to Construction and Engineering…

As a post-script I would add that since that first meeting I have belonged to PMI for many years and attended numerous meetings in a variety of other locations and chapters which were well attended by individuals from a wide variety of organizations and disciplines.

What Does The CEO Want From The PMO?

Project Management Offices, and those with an enterprise flavor (or e-PMOs), tend to think they’re all about project portfolio management and project execution and performance. But these topics can sometimes be lost on a CEO as they don’t innately sound like they relate to the company’s vision, strategy, or performance. Thus, when cost-cutting time comes, the PMO looks like one more piece of G&A bureaucracy ripe for the chopping block.

What does a CEO really look for? To a CEO, the company is driving toward a vision – hopefully a compelling vision to the marketplace; a good example is Google’s “Organizing the World’s Information.” That vision translates into strategies to implement and further the vision. Those strategies require changes to be made in the corporation to either implement the strategy or to course-correct. The CEO is more than willing to invest in these changes to help drive the company forward.

Projects, of course, are the main vehicles used to implement change. They aren’t just isolated business cases proposed as pet projects by department heads – they should actually be creating the changes required to drive the company into the future. So, what PMO directors really want to show the CEO is how the PMO helps orchestrate and execute these changes.

First, the PMO needs to ensure that all changes connect to strategic goals and investment priorities. Each change should carry an investment classification – Run, Grow, Transform is a popular model. I like Strategic, Improvement, and Run. It provides a quick justification for the change – we need this change to keep the business running, make it more efficient, or to further corporate strategy. For strategic projects it is important they align with the stated corporate strategies. If not, is it really furthering the vision of the company?

Key PMO Value: Making sure the right changes (projects) are selected

On the orchestration side, the PMO’s involvement with portfolio planning is critical. There are two basic modes: the Annual Operating Plan (AOP) and the funneled intake process. Often, both are employed. The AOP usually emanates from the executive team as a set of strategies and initiatives with proposed funding amounts attached. The PMO’s job is to make sure these initiatives get fleshed out, planned, funded, and finally executed. They are an invaluable resource to the CEO in making sure business plans become reality.

The intake model is more typical and involved, sorting through numerous requests for changes and deciding which to pursue. Here again the PMO is valuable as the facilitator of the process, providing objective information on the alignment and relative value of each request to enable steering committees or executives to make sound business-focused investment decisions.

Either way, if the CEO sees the PMO as effectively aiding the planning of organizational changes they will be in good stead.

Best Practices for Success: Effective Reporting, Performance Metrics

When reporting on execution progress, don’t just group a project list under investment classes or strategies. Do you really think the CEO has time to wade through all that data? There are better ways of reporting progress more suited to the executive suite.

First – they are interested in how much has been invested and the returns from those investments. To highlight the investment side, pie charts dividing the budgets by investment class, strategy, and business unit work really well. Returns are trickier as not all changes result in direct dollars to the bottom line. Some are measured in market share, customer satisfaction, or other non-financial metrics. The key is creating a benefits scoring model that rationalizes the various stats into benefit units. Then report the expected benefit points out per portfolio and follow up – if you can! – with the actual results post-change.

Next up on the CEO’s list – how are the investments faring? Now we’re talking standard project performance metrics, but grouped up to the portfolio level. Budget pie charts of project health (Red, Yellow, Green) work well for a high level view. If they want more info on critical projects the single-page or 4-square status report serves the purpose.

One question frequently asked by the C-Suite is when will these changes hit the organization? The best tool I’ve seen  is the project landing map. This usually has a Gantt bar for the life of the project and milestone markers for only the go-live events. It’s a graphical timeline of change impacts across the enterprise.

If you want to put this all together in a nice neat package for corporate execs the portfolio deck does the trick. I’ve seen this used at Fortune 500 and even Fortune 100 companies at the CEO level to great effect. This is a published (often pdf) document that  starts high level but has more detail in the body for reference if needed. A common format would be:

-          Investment Pie Charts

-          Project Landing Map

-          Portfolio list (not project list) showing budget, actual, variance totals along with average health and average schedule variance.

-          Program list (largest and/or most important programs/projects only) grouped by strategic portfolio with standard health, financial, and schedule status indicators

-          4-square project status reports for all projects listed above

So to give the CEO what they want, think like a CEO instead of a project or portfolio manager. When you’re running a company, you want to know you’ve made the right investments in strategic change and that those investments are paying off.

PMOs Must Evolve to be Relevant

Recently, the Harvard Business Review conducted a surveyof nearly 1,500 IT projects, inspecting the preliminary budgets, actual costs, and the final results of each initiative. After reviewing these projects, the authors found an astonishing average cost overrun of 27 percent (with each project running about $167 million). Perhaps more shocking, one in six projects went over budget by an astounding 200 percent, and ran past their initial schedules by an average of 70 percent. If these projects are not viewed as delivering tangible benefits to the business, they can cost an IT executive their job, and the company can suffer a significant loss of reputation or revenue.Ambitious IT projects require PPM tools and processes that provide visibility and enable collaboration in real-time to avoid or eliminate massive cost overruns and schedule delays like those in the survey. To remain relevant, PMOs must prove their worth through integrated planning, consistent metrics for performance, flexible and adaptable methodology frameworks, and accountability for results.Recently during our global user conference, Adapt 2011, Daptiv met with more than 150 attendees from 8 countries. The theme of the conference was “Realizing Business Value through PPM” and a major focus for attendees was how PMOs adapt to the “New Normal” of business uncertainty in their companies and the broader economy. A few key lessons from successful PMOs emerged that are worth sharing:

1.) Where the PMO reports to is important for how it is perceived in the organization. According to recent Forrester research, PMOs that report to the CEO or CFO are much more likely to be perceived as delivering significant value. If your PMO reports to the VP of IS/IT then keeping a strategic focus is key to being perceived as delivering business value.

2.) Communities of practice are important to gain influence in an organization. Listening to individuals in your organization, frequent meetings, sharing knowledge and mentorship, and proving support (not mandates) will lead to a PMO being viewed as a valuable and influential partner in the organization.

3.) There is a growing trend for successful PMOs in IT to expand to an EPMO, covering business investments as well as IT strategy and planning. A Daptiv customer who has successfully made this transition and presented at the conference was Mercy, a health care system with over 25 hospitals and 200 clinic locations, which incubated their PMO in the IT organization before creating a very successful Enterprise Project Office in 2007.

Yes, IT delays happen, even with the best of intentions. More often than not, they can be avoided through careful planning, communication and collaboration. IT governance and PPM tools have come a long way over the past several years and increasingly the PMO is playing a more strategic role within the organization beyond IT.

Let us know whether you agree with these takeaways and what other trends you are seeing in your business as we move into 2012.