As An Executive, How Can I Tell if My PMO is Effective?

In many organizations around the world, the Project Management Office (PMO) has become an integral strategic business partner for project execution, strategic alignment and business benefit delivery.  And, while the PMO is traditionally charged with the responsibility of devoting much of its attention, time, effort and resources into monitoring the performance of individual projects, not as much time is usually spent on the performance of the PMO itself.  This is a true leadership disconnect, as there is a direct correlation between the health of a PMO and the health of the portfolio of projects that it is responsible for managing.  Failing to pay attention to the effectiveness of the PMO can lead to a lack of executive confidence in the PMO, the risk of enduring painful re-organization or cost reduction exercises, or even shutting the PMO down completely.

Unfortunately, PMOs have had a less than stellar survival rate over the past few decades.  In fact, in 2010, Gartner presented a comprehensive PMO study at the ‘Symposium ITXPO’ which showed that over the previous seven years, nearly 50% of all PMO’s had failed or been otherwise disbanded or dissolved.  They cited the main cause of failure as, “sponsors and/or executive leaders perceived that their PMO did not provide sufficient value to the organization to justify the cost and org structure.”  Read that again…”did not provide sufficient value to the organization.”  

This is precisely why it is very important for PMOs to have a process and/or scorecard to measure their own success and worth to the organization.  During every economic downturn, corporate executives go searching for things to cut.  Anything that shows up on their radar as being inefficient, ineffective, redundant or too costly to justify is immediately a candidate for expulsion.  If the PMO had a process to track meaningful metrics, communicate project successes, demonstrate positive project benefit payback and keep executives informed of the direct strategic business benefit that the PMO brings, it’s chances for survival would be greatly increased.

As the role of the PMO becomes more entrenched within organizations, and as the services they provide become more crucial than ever in supporting the delivery of key strategic business priorities, PMO leaders need to ensure that their structure, processes, people and expectations become more effective, efficient, accountable and demonstrative of their value to the organization.  Executives have every right to expect PMOs to develop and report upon a minimum set of key metrics to track PMO performance and value.

One of the key service offerings we provide at Think For A Change is an external audit on the effectiveness and efficiency of organizational PMOs.  Sometimes our clients are PMO leaders themselves, looking for help on how to capture a baseline of current effectiveness so they can develop an improvement plan.  Other times, our clients are executive team members looking for an independent review of their PMO’s structure, operations and performance.

In either occasion, we leverage our PMO Target Assessment Model:

PMO Target Assessment Model

Each ring on the PMO Target Assessment Model represents one of the four core performance themes we would expect any effective and efficient PMO to deliver as part of the their foundational services.  Within each ring, we measure four specific key metrics associated with the core performance theme.

Starting on the outside ring, we assess the PMO on the most basic of expectations for any PMO, Strategic Alignment.  In this theme, we measure:

  1. Organizational Strategy Awareness & Comprehension
    • Awareness and comprehension of strategy by PMO team members.  Effectiveness of strategic communications both inside and outside of the PMO.  Refresh rate of strategic changes.
  2. Existence of a Strategic Portfolio Alignment Grid
    • Classification of projects and programs across a grid of organizational strategic goals/themes (ie. Risk/Reward, Cost/Benefit, etc.)
  3. Strategic Investment Alignment
    • Classification of projects and programs across a grid of organizational investment and risk categories (ie. Maintenance/Keep the Lights On, Small Projects, Major Projects, Innovation/R&D Projects, etc.) to
  4. Strategic Resource Allocation Alignment
    • Classification of projects and programs across a grid of organizational work types and resource classes (Process Improvement, Maintenance, Departmental, Cross-Functional, Organizational, etc.)

Second, we assess the basic Operational Efficiency of the PMO across the following measures:

  1. Financial Management Performance
    • Review of forecast to actual budget performance for the PMO organization itself, not the projects and programs they manage.  Includes personnel salary/benefits, office expenses, travel expenses, recognition expenses and other business unit financial metrics
  2. Resource Turnover Rate
    • Percentage of PMO resource turnover.  Used to identify causation trending and/or uncover departmental cultural or management issues
  3. Resource Utilization Rate
    • Percentage of PMO resource utilization.  Used to determine how much time that PMO resources are spending on actual project/program management vs. administrative functions
  4. Project Initiation Time
    • Elapsed time spent gathering, documenting and preparing new project proposals from intake to presentation at approval body.  Used to determine basic process efficiency.

Next, the PMO is assessed on its Execution Effectiveness:

  1. Budget Variance Average
    • The average of the Cost Performance Index (Budgeted Cost of Work Performed divided by the Actual Cost of Work Performed) of all active projects
  2. Schedule Variance Average
    • The average of the Schedule Performance Index (Budgeted Cost of Work Performed divided by the Actual Cost of Work Scheduled) of all active projects
  3. Projects Exceeding Control Limits
    • Using Earned Value Management (EVM) methodology, and following the establishment of the upper and lower control limits for variance, the number of projects with EVA scores falling outside of those control limits.
  4. Estimation Accuracy
    • The accuracy rate (%) of project team work effort and budget estimation to actual hours and/or costs

Finally, we assess the core purpose of any effective and efficient PMO, its ability to deliver actual business value via post-project Benefit Capture:

  1. Cost/Benefit Accuracy
    • Measurement of the accuracy of the actual delivery of benefits, return on investment, rate of return and/or payback period as compared to the project initiation cost/benefit analysis forecast or estimation
  2. Average Number of Scope Changes
    • Measurement of the amount and causation of project scope changes to assess whether project benefits/deliverables were “scope changed out” of the project to satisfy cost and/or schedule targets
  3. Customer Satisfaction Scoring
    • A subjective measurement of customer satisfaction scores and/or survey results from the intended key stakeholders, customers and/or consumers of the project’s deliverables and proposed benefits
  4. Strategic Intent Validation
    • Did the project have the intended impact on the strategic intent of the organization?

There are so many more variables that go into determining whether a Project Management Office is effective, efficient, and ultimately, worth the organizational investment in the structure.  Every organization and every PMO will vary in their intent, mission and purpose.  The key assessment metrics included in our PMO Target Assessment Model are designed to provide a snap-shot view of any PMO against current best practices.  Smart PMO leaders track the effectiveness and efficiency of their own practices, design strategies for continuous performance improvement, and regularly present this information to the executive leadership team, all as a means to demonstrate and communicate their contributing value to the organization regardless of the economic environment that may exist inside or outside its walls.

 

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