Did you know that the PMO dates all the way back to the 1930s, and it was initially invented by the US Air Corps to get a better handle on their projects and gain visibility to enable good decision-making, especially around budgeting? While the PMO has evolved over the past 90 years, unfortunately, most organizations are not taking full advantage of how a PMO can transform the business.
If you were to ask the executives of every Fortune 500 company how they feel about their PMO, most of them will perceive the PMO as an administrative overhead and bureaucratic body impacting the agility of the business. These are the zombie PMOs that are unable to truly quantify their value.
Regardless of where your organization’s PMO maturity falls, let’s walk through why the PMO gets a bad wrap and how to transform your PMO to a strategic position delivering on company initiatives and ultimately positively impacting the bottom line.
Why PMOs Get a Bad Rap
I have worked with large companies that have built and decommissioned, centralized and decentralized the PMO over 5 times in their history. The only reason you would disband the PMO is because it is viewed as a cost overhead and not a strategic element for the business. Let’s review some insights into why some people may view PMOs as cost overheads rather than strategic assets:
1. Lack of clear value proposition: In some cases, PMOs may struggle to clearly articulate and demonstrate their value to the organization. If the PMO is primarily seen as an administrative function focused on compliance and documentation, its strategic contributions may not be readily apparent, leading to the perception of it being a cost overhead.
2. Ineffective communication and reporting: If the PMO fails to effectively communicate its achievements, benefits, and strategic contributions to key stakeholders, its value can be easily overlooked. Without a clear understanding of how the PMO aligns with the organization’s strategic objectives, it may be seen as an unnecessary expense.
3. Excessive bureaucracy and rigidity: If the PMO becomes overly bureaucratic, imposing rigid processes and stifling agility, it can hinder project progress and innovation. This perception of the PMO as a hindrance rather than an enabler can contribute to the view of it as a cost overhead.
4. Lack of alignment with organizational strategy: If the PMO’s activities and priorities are not aligned with the broader strategic goals of the organization, it may be seen as disconnected from the core business objectives. When this misalignment exists, the PMO’s value as a strategic asset diminishes, and it may be viewed as an unnecessary expense.
5. Difficulty in measuring and quantifying benefits: Demonstrating the return on investment (ROI) or quantifiable benefits of a PMO can be challenging. If the PMO struggles to track and communicate the value it delivers in terms of improved project outcomes, cost savings, risk mitigation, or resource optimization, it can contribute to the perception of it as a cost overhead.
It’s important to note that these reasons are not all-inclusive, and there are organizations that have successfully established PMOs as strategic assets that drive project success, governance, and alignment with organizational strategy. The perception of the PMO can vary widely depending on factors such as organizational culture, leadership support, and the effectiveness of the PMO in delivering tangible value to the organization.
Where does your PMO fall on the Maturity Scale?
Before you can put a plan of action together to improve the value rendered from a high-performing PMO, you must first understand the state of your current PMO. Identifying the current maturity through honest evaluation will help you to complete a gap analysis and strategy for improvements.
Be sure to take off the rose-colored glasses and get a true perspective on where the PMO sits today and the perceived value it provides. Have conversations with the leaders in the organization and get their perspective. Understanding where your organization’s PMO sits today is critical in order to take the steps required to get where you need to be.
The Business Value of a Strategic PMO
According to the Project Management Institute, around $1 million is wasted every 20 seconds by organizations across the globe due to poor project management causing ineffective execution of business strategy.
Take a look at these troubling statistics that are impacting the bottom line of your business:
- Only 2.5% of companies successfully complete 100% of their projects
- 70% of projects fail
- The average cost overrun of all projects is 27%
- 57% of projects fail due to a breakdown in communications
- 39% of projects fail due to a lack of planning
- The failure rate of projects over $1M is 50% higher than the failure rate of projects below $350K
Given the above stats, there is a huge shift needed to develop a strategic Project Management Office (PMO) that can deliver impactful business value to an organization, such as:
1. Enhanced Project Success: A strategic PMO provides oversight, guidance, and support to project managers, ensuring that projects are executed effectively and aligned with the organization’s strategic objectives. By implementing standardized project management methodologies and best practices, the PMO can improve project success rates, leading to increased customer satisfaction, reduced project risks, and improved project outcomes.
2. Resource Optimization: The PMO can play a crucial role in resource allocation and optimization. By centralizing project information and coordinating resource allocation across projects, the PMO helps identify resource gaps, avoid resource conflicts, and optimize resource utilization. This leads to better workforce productivity, cost savings, and improved project delivery efficiency.
3. Portfolio Management: A strategic PMO often assumes responsibility for project portfolio management (PPM). It helps senior management evaluate project proposals, select the most promising initiatives, and prioritize resource allocation accordingly. The PMO ensures that the project portfolio is aligned with the organization’s strategic goals, facilitates effective decision-making, and enables the organization to invest in projects that generate the highest value and align with business priorities.
4. Standardized Processes and Methodologies: The PMO establishes and enforces standardized project management processes, methodologies, and documentation templates. This consistency and structure streamlines project execution, enhances collaboration, and facilitates knowledge sharing among project teams. Standardization helps reduce errors, rework, and delays, leading to increased efficiency, improved project quality, and better overall project performance.
5. Risk Management: The PMO plays a vital role in identifying, assessing, and mitigating project risks. It helps project managers develop risk management strategies, monitors risk throughout project lifecycles, and provides guidance on risk response activities. By fostering a proactive risk management culture, the PMO minimizes the impact of risks on projects and the organization, ensuring that projects stay on track and achieve desired outcomes.
6. Stakeholder Management and Communication: The PMO helps improve stakeholder management and communication across projects. It facilitates effective communication channels, ensures stakeholders are engaged and informed, and provides transparency into project progress, risks, and issues. Better stakeholder management and communication lead to stronger relationships, increased stakeholder satisfaction, and improved organizational alignment.
Overall, a strategic PMO contributes to organizational success by driving project excellence, optimizing resource utilization, ensuring alignment with strategic objectives, minimizing risks, fostering collaboration, and promoting a culture of continuous improvement. This all translates to dollars; whether it be cost savings, increased revenue generation, or improvements in margin, it ultimately positively impacts the bottom line and justifies the PMO as a critical business partner in the organization.
Moving your PMO Toward a Strategic PMO
Another interesting fact is that 70% of high-performing companies understand the value of project management. You could even say, project success is directly linked to the scale in which your company values the PMO, so how do you start evolving.
If your PMO is not evolving and delivering the job required, there is a high probability of the PMO being eliminated. This often occurs during periods of significant budget cuts, or when the business identifies investment opportunities in other areas that are perceived to deliver greater value.
To increase your PMO (Project Management Office) maturity level after you have completed an honest assessment of where you are today, review some of the key areas below to start taking steps in the right direction.
- Define a vision and strategy: Develop a clear vision and strategy for your PMO’s growth and improvement. This should align with the organization’s overall goals and objectives. Consider factors such as project success rates, resource utilization, stakeholder satisfaction, and strategic alignment.
- Establish standardized processes: Implement standardized project management processes and methodologies across the organization. This includes defining project initiation, planning, execution, monitoring, and closing processes. Standardization helps improve consistency, efficiency, and collaboration among project teams.
- Develop project management competencies: Assess the skills and competencies of your project management professionals and identify any gaps. Provide training and development opportunities to enhance their project management capabilities. This can include certifications such as Project Management Professional (PMP) or Agile certifications and couple that with coaching and mentoring programs.
- Enhance project governance: Strengthen project governance by establishing clear roles, responsibilities, and decision-making processes. Implement regular project reviews and performance assessments to identify issues and take corrective actions promptly. Encourage effective communication and collaboration among project stakeholders.
- Improve project performance measurement: Develop key performance indicators (KPIs) and metrics to measure project performance. These metrics should align with organizational goals and objectives. Regularly track and analyze project data to identify trends, bottlenecks, and areas for improvement.
- Foster knowledge sharing and lessons learned: Encourage knowledge sharing among project teams and capture lessons learned from completed projects. Establish a repository or knowledge base to store and share best practices, templates, and project artifacts. This enables continuous learning and improvement across projects.
- Enhance stakeholder engagement: Strengthen stakeholder engagement by actively involving them in the project management process. Regularly communicate project status, risks, and changes to stakeholders. Seek their feedback and address their concerns promptly. Engaged stakeholders are more likely to support project success.
- Embrace technology and tools: Leverage project management software and tools to streamline processes, improve collaboration, and enhance project visibility. Explore project management platforms, collaboration tools, and reporting systems to automate manual tasks and improve efficiency.
Remember that increasing PMO maturity is a journey, and it requires commitment, dedication, and support from the organization. It may take time to achieve higher maturity levels, but the benefits in terms of project success and organizational efficiency are significant.
This can be a daunting task, not to mention time-consuming. You do not have to embark on this journey alone. Unfortunately, there is no one-size fits all approach to establish your organization’s optimal PMO, but partnering with a company like EPMA can help you achieve those goals faster through a phased approach to tackle the most pressing challenges first and build upon that.
Continuous Improvement and Evolving the PMO
A strategic PMO emphasizes continuous improvement and learning from project experiences. By capturing lessons learned, identifying areas for improvement, and implementing corrective actions, the PMO enhances project management capabilities within the organization. This continuous improvement mindset helps drive innovation, foster a culture of learning, and enables the organization to adapt to changing business needs and industry trends.
Regularly review and assess your PMO’s progress and adjust your strategies as needed. Conduct periodic maturity assessments to track improvements and identify further areas for growth. Foster a culture of continuous improvement within the PMO.
The role of the PMO is vital to an organization’s success if it is established properly and drives the right results. Ensure the PMO is recognized for the critical function it plays. This may take some maturing, better communication, and improved alignment with business strategy, but there is a profound connection between effective project management and the financial performance of an organization.
EPMA is a global solutions company focused on delivering projects better. Our unique proposition that embodies the full ecosystem and portfolio of any organization has enabled us to deliver projects better and make a significant difference. Our unique and proactive approach has generated significant cost savings and increased revenue for our clients. We are more than ever before positioned to add value, advise, and impact your organization.
Interested in hearing more? Please contact EPMA at 832.772.3762 or email us at [email protected]