201.0 The Value of a PMO

There should be no question that your organization will find value in good, sound project management practices. In fact, the larger the project is, the more project management becomes a requirement for success, not just a value-adding proposition.

In general, the value of a common project management process includes:

  • Reduced cycle time

  • Reduced delivery costs

  • Improved quality of project deliverables

  • Early identification and proactive management of project issues and risks

  • Better containment and management of project scope

  • More opportunities to leverage and reuse knowledge

  • Improved accuracy of estimates

  • Better communication with clients and stakeholders

  • Improved perceptions of your organization by your clients

  • Improved people and resource management

  • Reduced time to get up to speed on new projects

Project management processes are applied at a project level. Since we assume that the project itself has some business value, you should be able to show that project management processes have value if they help you to complete the project within expectations.

Taking this one step further, you might think that if project management is good (since it helps to deliver projects within expectations), then there should be value associated with a group that will help implement project management processes. However, not all companies view it this way, and a PMO does not mean the same thing in every company. For one thing, the PMO does not always manage projects, and so in many organizations the PMO does not have a direct project connection. It is indirect. So, the value proposition for a PMO can be less tangible and more subjective.

A PMO costs money to staff and to run. The hope is that the money and time invested in the PMO will be more than saved by delivering projects better, faster and cheaper across the entire organization. However if you find that the cost savings on projects are offset by the cost of the PMO and this is not acceptable, it may point out a need to reduce the costs associated with the PMO to make this value proposition work.   

An organization typically needs to be of a certain size before the costs associated with a PMO becomes beneficial. At one extreme, if you only have one small project per year, you do not need a PMO since it is much less expensive to provide dedicated project management training and support to the one project manager. If you have a handful of projects every year, you may still be able to get by with the few project managers collaborating and agreeing to a certain set of common processes and templates.

Now, let's go to the other extreme. Let's say you have a large, diverse organization that delivers dozens, hundreds (or thousands) of projects per year. In this environment, there may be dozens or hundreds of project managers, each with varying levels of skill and experience. A lack of common processes results in project managers and team members having to learn new processes as they move from project to project. In addition, no one has any idea whether the company is successfully delivering projects in general, and no one knows what anyone else is doing.

In this environment, a centralized PMO makes great sense to ensure that all project managers have a core set of project management skills, common processes and templates. The PMO also acts as the owner of the project management methodology and a support organization that project managers can utilize for project management assistance. In addition, the PMO can serve as a place for providing an organization-wide view of the status of all projects and can report on the improvements being made to project delivery capabilities over time.

Of course, most organizations are somewhere in the middle. They have more than a couple projects per year, but not hundreds. Each organization needs to look at their own environment to see if they need a PMO. At a high-level this starts with understanding the projects executed in a year and whether the projects were completed successfully. In a broader sense, the analysis starts with gaining an understanding of your project environment today and what you think your project environment should look like in the future. If your future state vision is close to your current state, there may not be a reason to make any changes. However, if you are not where you want to be, a PMO may be the organizational mechanism to get to this desired state. There are many options to look at for implementing a PMO. The major organizational models will be explored later.  

In addition, one obvious motivating factor for implementing a PMO is the amount of pain that the organization feels over failed projects. If most projects end successfully without a PMO, there may not be a strong motivating factor to build one. However, if there is a lot of pain associated with project delivery, the organization will be much more motivated to invest resources in a PMO to turn the situation around.

At a high level, a PMO is increasingly being viewed as an essential component that enables the success of projects, and hence, the future success of the entire organization. At a more tactical level, the value provided by a PMO is summarized below. Although PMOs can be established to provide a narrow or broad set of services, this list includes many of the common responsibilities a full PMO would perform.

  • The PMO builds or licenses a common set of project management processes and templates, which saves each project manager or organization from having to create these on their own. These reusable project management components help projects start-up more quickly and with much less effort.

  • After the project management processes are deployed the PMO enhances and supports them over time. As new or revised processes and templates are made available, the PMO deploys them consistently to the organization. 

  • The PMO facilitates project communication by defining a common terminology. There is less misunderstanding and confusion within the organization if everyone uses the same language and terminology for project related work.

  • The PMO sets up and supports a common repository so that prior project management deliverables can be candidates for reuse by similar projects, further reducing project start-up time.

  • The PMO provides training (internal or through vendors) to build core project management competencies and a common set of experiences. If the training is delivered by the PMO, there is a further reduction in overall training costs paid to outside vendors.

  • The PMO delivers project management coaching services to help apply good practices on specific projects. Coaching services can help project managers understand and apply the practices more quickly. Projects at risk can also be coached to help them complete successfully or at least ensure that they do not get any worse.

  • The PMO tracks basic information on the current status of all projects in the organization and provides project visibility to management in a common and consistent manner.

  • The PMO tracks organization-wide metrics on the state of project management, project delivery and the value being provided to the business by project management in general, and the PMO specifically.

  • The PMO acts as the overall advocate for project management to the organization. This includes educating and selling management and team members on the value gained through the use of consistent project management processes.

The process of setting up a PMO will help determine which products and services make sense for a specific organization. PMOs can do some or all of those listed above, and they may do many others as well.

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