At last month’s PMO Conference in London the sessions and conversations were all about the relationship between the PMO and the business or organisation a PMO sits within. The overriding message is – the PMO belongs to the business and it is there to response to business needs. Whatever they might be, this is the starting point for a PMO.
The session on the Next Generation PMO was presented by Andy Jordan, chief PMO writer over at PMI’s ProjectManagement.com who regularly writes about PMOs in all their different guises.
Before the next generation of PMO can be fully understood it is imperative that we understand where we are now and what will drive the changes to the business which in turn determines what kind of PMO is needed.
It’s worth noting at this stage that we are not talking about a single PMO entity. In order to meet the business needs of the future, different types of PMOs are needed.
Below, Andy lays out the different types of PMOs that already exist in the business landscape today. They will still exist in the future – what will change is the function they perform and the services that they offer. With this change also comes a change in the type of practitioners who work within these PMOs.
When a presenter says the future looks both scary and exciting, PMO practitioners around the globe should be on the edge of their seats.
Let’s find out more about what this future looks like.
Strategy Execution in Today’s Organisations
The next generation PMO will have portfolio management at its core.
The set of principles and processes called portfolio management are currently being used to help bridge the gap between organisational strategy being set at the highest level and the strategy becoming a reality across a business. Programmes and projects are the back bone of strategy execution – the vehicles for managing the changes that need to happen in order to meet the strategic goals.
To date, portfolio management has been instigated in two different ways in organisation – bottom up and top down.
With bottom up, it has been the change from projects simply delivering against the iron triangle of cost, time and scope – to the more benefits driven outcomes, or the focus on delivering business goals. Project practitioners have become more aligned from the bottom up – from the projects they deliver and the link to why they’re delivering it in the first place (the strategic goals)
With top down, many organisations have made a conscious decision to implement a portfolio structure which is driven from the top – the strategic goals are set, the portfolio is optimised and balanced, projects are selected and then executed.
There are still current challenges for organisations who have opted to take a holistic, enterprise view and managing all the organisation’s investments in this way.
Portfolio Management Challenges Today
Portfolio management is still seen as an overlay to other processes within the business so there is no integrated approach. The most common example of this is the business annual planning cycle. Practitioners heading up portfolio management in an organisation are often only engaged in the planning cycle once it has been completed. Andy noted that in this situation it is only portfolio execution not portfolio management. The business planning cycle is out of sync with the realities of the business, especially if we consider how rapidly businesses are changing today. Does planning today work when competitors and an economy are changing within 12 month, 6 months, a week?
Portfolio planning within organisations is still subjected to politics and personal objectives which override the good of the organisation. How many of us have seen heads of departments choose projects based on their goals and their agenda?
And how much of the annual planning is actually forgotten once it has been agreed and signed off? The world doesn’t stop turning and changing so why does it only make an appearance once a year?
There is also inconsistency across different departments, different projects – even over time in how portfolio management is used.
There is still a disconnect between strategy formulation and the development of strategic goals and strategy execution. Strategies don’t automatically drive project changes. There is also no adjustment as portfolio level when project shortfalls occur and there is no benefits accountability in project approvals (if benefits are stated in the business case, why isn’t someone held to account?)
Improvements in portfolio management are being made – but they’re slow evolution rather than a much faster, much-needed revolution. Plus early promises about the success rates of portfolio management are still not being delivered. There is no enterprise roadmap for improvements in areas such as portfolio maturity; evolution of planning and for benefits enhancements (realisation, tracking and accountability)
There is now a call for new solutions for existing problems – but also new solutions for completely new problems as the business changes.
The Next Generation PMO
“Next generation portfolio management will create ‘portfolio driven’ organisations”
Portfolio management becomes the hub for all project work – it drives all non-operational activities.
It oversees everything from ideas to planning through to the “attainment of benefits”
Crucially it also integrates other functions of the organisation so change takes place with less friction.
If portfolio management is the function – the PMO is the entity in which it sits.
And for PMO, that means a new way of looking at the role.
The hub model brings in a few new angles for PMO practitioners to think about:
The obvious part of change management – that of change control – is a given in PMO. Change management here is about the change manager type activities – this is not about the PMO taking over the change manager role – it’s about the PMO being an enabler. Of course it can become a different story if the organisation doesn’t have a dedicated role of change manager.
If the PMO is aiding integration of business functions it stands to reason that they can add support here – especially around change readiness – which Andy described as getting a department ready for change, being able to assess whether they are already experiencing too many levels of change – or have become change fatigued. If the PMO is already working closely with departments – doesn’t it make sense to use some of the insights and even gut feelings as to what is happening.
Again this is about working with the financial department – not a land grab.
Enterprise Resource Management
This is about the PMO working closer with Procurement and HR – not just in planning for resources in the future ahead but also in the impact of new projects which in turn produce new products to market. Is the organisation ready to launch a new product – do they have enough sales people? Is there enough people in marketing available to work on it? When the PMO is the portfolio management hub they see everything from idea, to planning, to execution and delivery. They, more than anyone else in the business, can see the launch date of product X one month and product Y a month later. So what’s the implication for the business in terms of the longer term resources needed to manage and deliver that new product to customers.
It’s powerful stuff when you think where the PMO picks up its information and who it can share it with in order for the business to thrive.
The Network of PMOs
I’ve always preferred the term a network of PMOs in an organisation – rather than the “hub and spoke” term. Depending on the organisation – how much change is being initiated and managed – will drive the PMO solution required. The mantra is – the business owns the PMO, it decides what is needed to successfully drive change and meet strategic goals.
Andy laid out what an integrated, network of PMOs could include in order to provide “portfolio management as a hub”.
The Strategic PMO
What may be a new term is the Strategic PMO – not really. Organisations already have them, they are usually called Enterprise PMOs (if they include portfolio management as a function); Portfolio Management Office; Strategic Change Office and so on.
What’s crucial to understand here is not the name or how many PMOs are required With a strategic PMO it is a focus on five areas:
- It is centred around portfolio management
- It needs relationship management – contacts across the organisation
- It needs dependency management – to really understand the impact of decisions made
- It needs alignment management – across the whole organisation
- It needs proactive issue management – a low tolerance for variance.
What the Strategic PMO Actually Does
The Strategic PMO’s daily life includes these functions and services:
The four core areas – planning; execution; control and value include:
- Backlog management – what’s in the portfolio
- Prioritising projects and programmes in the portfolio
- Adjusting goals in response to changes – how the organisation is reacting to changes in their marketplace
- Analysis of new opportunities that present themselves from the marketplace
- Portfolio modelling – how new things will change the portfolio – assessing the impact and providing predictions.
- Capability and capacity analysis – do we know what’s going on now and in the future? Do we need to recruit? Upskills?
- Resource optimisation – being able to move resources around, putting people in the right work etc
- Initiating projects from the backlog – starting out on the right foot
- Coaching and supporting people to do what they know best
- Change management – making constant small adjustments rather than major changes
- Portfolio performance analysis – how are we doing against the metrics
- Variance analysis – low tolerance to variance and making small adjustments
- Change initiation
- Cancellation of projects – “kill early, kill cheap”
- Monitoring and evaluation against the goals
- Variance analysis – analyse and act
- Cost of Value / ROI – not just on the project but the whole lifetime of the product
- Portfolio adjustments – as things change, so does the portfolio
- Planning integration – across the whole business
So What Does this Mean for PMOs Today?
New solutions to new and existing problems – and a call to action from Andy to help PMO thinking in providing new solutions.
There is an increase required in:
- Team empowerment – help the teams make the right decisions about the work they undertake by giving them the bigger strategic objectives picture of why they’re doing what they’re doing in the first place.
- Consistency in stakeholder engagement across the whole business – even the ones that are hard work (especially those)
- Focus in value and cost of value – what value is the project delivering – make it visible, understandable to everyone.
- Accountability – especially in the business case and stated benefits
- Departmental integration – for strategic objectives to be met, all areas of the business will experience change – everyone needs to work together
- Whole portfolio integration – not just the easy bits – also the areas such as annual planning
- Rate of change – because businesses can’t afford to stand still anymore
- Cancellation rates – kill off the projects we don’t need anymore – do it early and refocus resources elsewhere
And for balance, there is a reduction or decrease needed in these:
- Reduce the length of planning cycles – why annually? why not every month?
- Reduce the tolerance for variances – if projects are going off the tracks, get them early, make adjustments quickly
- Reduce the size of change – think incremental changes rather than major, big bang.
- Reduce the number of “inflight” projects – organisations are just doing too many projects, scale back, do the stuff that’s really important
- Reduce the importance of constraints
- Reduce formal approvals
- Reduce the number of silos (functional and project)
- Reduce the fear of failure – it brings the opportunity to launch something that is better.
The entity of PMO in organisations that deliver change is one which has evolved considerably over the last twenty years – as businesses have adapted and changed over that time – so too does the PMO. The next generation PMO is about enabling and supporting an organisation do the best it can to realise the strategic goals that it sets – to do that, the portfolio hub, the strategic PMO, is plugging that gap between the strategy formulation and the strategy execution. Not only that, it is also enabling and supporting strategy execution itself – the programmes and projects being delivered across all different departments and areas of the business.
It is no longer the sole domain of the IT department – from where traditionally it has grown – now the PMO is where it needs to be – supporting and enabling the whole business.