Today, IT organizations spend a large amount of their time delivering projects. While success rates have improved to approximately 34 percent, 15 percent of all projects still fail and 51 percent are somehow “challenged,” according to research from the Standish Group. There are many reasons why IT projects fail — several of which can be attributed to a lack of visibility into long-term project needs. Without proper visibility, organizations are unable to see what is needed six months, three months or even two months down the road, resulting in poorly constructed project plans that do not capture critical dependencies, including assigning project resources and key milestones.

One way organizations have moved from an ad hoc approach to a more effective process is by implementing a project management office (PMO). To create a successful and useful PMO, you must first assess needs and resources by determining the state of your company’s existing IT efforts, confirming the overall business goals and creating a roadmap that brings together the necessary people, processes and technologies to achieve them. Organizations are then able to establish a PMO that ensures efficient and cost-effective project execution and delivery.

Determining Your Organization’s Needs

The first step to establishing a PMO is to determine your organization’s IT needs. Start by examining the key processes in the areas of project, portfolio and program management as defined by the Project Management Institute’s (PMI’s) project portfolio management (PPM)/PMO framework. The PMI’s PPM/PMO framework breaks down the three levels of work (project, program and portfolio) into 12 process groups which contain 92 processes in total, relating to the management of knowledge areas. Examples of PMI processes/components include a project charter, project plan, work breakdown schedule and cost estimate.

You must also determine what type of management office best suits your needs (project, program or portfolio):

A PMO oversees a temporary effort with a definite starting and ending point. The PMO helps development teams finish projects on time and on budget through the use of established best practices, while ensuring the finished project or product meet stakeholder requirements.

A program management office oversees a collection of projects or portfolios that, when managed together, often provide greater benefits than if they were managed separately. A program management office is typically tasked with providing an optimal mix of resources and achieving economies of scale.

A portfolio management office oversees a collection of projects aligned to meet specific business objectives. Key objectives of a portfolio management office include aligning portfolios of projects and services to business goals and managing risk exposure to the business.

To determine what management office (or offices) best suits your needs, analyze which PMI process benefits your organization the most. For example, if your immediate issue is to improve project success rates, then consider starting with a PMO. If your immediate issue is the need to understand where your IT dollars are being spent, consider starting with a portfolio management office. The results of your needs analysis will guide you in determining which of the three offices are most suitable for your organization.

Determine Your Organizational Maturity

For the PMO to demonstrate clear and tangible value in a relatively short period of time, it is necessary to set up a process that quickly measures its value to the enterprise. First, a baseline must be established. Steps to establishing a baseline include:

Assess your organization’s capabilities against industry-standard best practices, such as those defined by the PMI’s PPM/PMO framework.

Record your level of maturity in each of these process areas using a capability scale from zero to four:

  • Level 0: Chaotic - No evidence of documented processes or best practices.
  • Level 1: Active - Documented processes carried out but not formalized.
  • Level 2: Efficient - Consistent discipline started but only in use in “pockets.”
  • Level 3: Responsive - Ubiquitous and measured.
  • Level 4: Business-driven - Provides data and information to drive business decisions.

Once the maturity level has been measured against the most important PMI processes, develop a target maturity level to quantify progress. If little or no accurate data is available to establish a baseline, you can seek out historical data points, such as the length of projects and the number of developers who worked on these projects, to help extrapolate a cost estimate and a baseline from which to measure future successes.

Simply measuring total project cost may make it difficult to do an “apples to apples” comparison. Instead, for example, use the following metrics to provide a more accurate representation to compare costs between projects:

  • Cost per use case,
  • Cost per function point, and
  • Cost per thousand lines of code.

Establish a Measurement Plan

To maintain the executive sponsorship it needs to effect organizational change, the PMO should institute a measurement plan that defines key metrics for determining the organization's progress against the established baseline.

If you used the above maturity analysis based upon the PMI framework to establish your baseline, use this same model to measure your progress at periodic intervals. Some of the measurements cited above, such as cost per use case and cost per function point, should also be measured to gauge progress and calculate ROI.

Implementing a PMO in Your Organization

Next, you must develop a phased rollout plan for establishing and implementing your PMO, because a high-performing PMO does not take form overnight. While there is no preset order for executing against this plan, below are three suggested steps on how to best implement a PMO into your organization:

Step One: Implement the PMO staff and determine reporting structure.

As the CIO’s “eyes and ears,” the CIO relies upon the PMO to make sure the organization is addressing the right needs and that budget is being applied toward initiatives that will sustain and grow the business. To make the most impact, the PMO must be championed from the top of the IT management hierarchy in order to have the authority to enforce best practices and gain the respect of practitioners.

The three offices within the PMO have different positions which perform a variety of functions:

PMO:

Process mentor - promotes and fosters best practices, provides mentoring and training, reviews deliverables and manages the overall infrastructure.

Project managers - typically report directly to the PMO.

Portfolio Management Office:

Business relationship manager - brokers communications between IT and the organization.

Program Management Office:

Program manager - understands the dependencies between key tactics and milestones within the various projects that comprise a program.

Step Two: Develop a “process encyclopedia.” To promote best practices, develop a simple repository or “library” of PMO materials - like project plan templates, project charter templates and workflow diagrams - as a “process encyclopedia” for the organization. Specific library items to consider for each type of office include:

Project management: Project templates, skills database, project performance dashboard/health monitor.

Program management: Program management plan template, work breakdown structure template, communications plan.

Portfolio management: Strategic initiatives (CIO or CFO-based), alignment category for project mapping, risk factors for each project’s business case (i.e., where it was initiated) and value to the business/projected costs (ROI and payback).

Step Three: Select technology to automate and enforce your PMO processes. With management structure and best practices in place, the next step is to automate and enhance PMO processes from project request and resource planning through delivery with appropriate technology. This technology should be equipped to support a variety of features, such as idea management, project initiation and project management. For instance, when someone has an idea for a new project, that individual will be prompted to enter the idea into a solution which can automate a workflow to ensure that all the right steps occur for proper IT governance before that project gets funded. Other features to request in a solution include portfolio management, planning and balancing, electronic timekeeping, project-level IT cost tracking, and project “health” dashboards and status reports.

One example of such a solution is PPM software, which supports established processes and automates the collection of data necessary to make informed project, program and portfolio management decisions. PPM software enables organizations to view projects with a portfolio view, making them better able to manage project lifecycles, resources and people to increase IT governance.

Execute Rollout Plan

Once the rollout plan is in place and stakeholder agreement has been secured, it is time to execute. To solidify the PMO’s position as a “trusted adviser” to the CIO and executive management team, a key execution strategy is to show value within a relatively short period of time (usually about 90 days). Early ROI will also ensure that the PMO gets the resources it needs to fully execute the rollout plan, and it will attract early adopters who can be showcased as process leaders.

How do you show value early on in the execution process? One idea is to “start narrow and deep” by focusing on projects that are deemed most critical and processes that will provide value to all levels of IT management.

As is the case with implementing any new process, there are a number of pitfalls which can have an adverse effect on a PMO rollout. Some key areas to think about before embarking on the rollout, as well as advice for mitigating risks include:

Cultural buy-in: At the beginning of the PMO process, there is usually a small decrease in productivity followed by an increase in project completion time after the implementation is complete. During the initial slow-down, it is important to have champions at the project and application manager levels who understand this dynamic and who are willing to accept a temporary drop in productivity in exchange for faster implementations in the future. Buy-in at the executive level is also paramount, so make it a point to understand key stakeholder wants and needs, and address them early in the rollout. This could be as simple as building a portlet which displays a simple project inventory.

Promote transparency: Project managers need to understand the importance of raising issues early so that course corrections can be made before timelines, quality and/or cost are put at risk. Project managers need to understand the benefits of a centralized repository or single system of record, such as PPM, which will alert project managers to potential problems while corrective action can still be taken.

System of rewards: Ideally, performance and best practice consistency should be tied to incentive-based compensation and individual’s career goals. Posting project status reports in a highly visible area also goes a long way toward changing behavior – peer pressure can be a powerful tool.

Training: Establish training and mentoring programs to ensure best practices are consistently followed after initial training is completed.

Communication plan: Communicating success is as important to sustaining PMO momentum as the process that goes into creating one. Develop a comprehensive communications plan that ensures successes are being highlighted across all the stakeholder audiences.

Benefits of Establishing a PMO - The First Step to Improve Quality and Time-to-Market

Many companies have already recognized the benefits of establishing a process improvement effort. The relationship between an organization’s process maturity level and its productivity has been studied extensively. While developing a software process improvement program can be costly, studies have shown that the resulting benefits of improved time to market, productivity and software quality far outweigh the initial investment costs. Establishing a PMO is the first step to improving project, program and portfolio management best practices to accelerate time to market and increase the quality of IT initiatives in a cost-effective manner.

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