Apr 29, 2014

One Size PMO Does NOT Fit All

Posted by Allen Young in Project & Program Management, Portfolio Management, Project Management Office (PMO), Project Management Research | 0 Comments

Y2K shifted the role of Project Office to a more strategic Project Management Office.

A good deal has been written about Project Management Offices (PMOs) in terms of the services they provide and the associated governance structures that go with them. I’ve seen the suggested types of PMOs range from as few as three to as many as twelve in my travels. Masha Nehme from Software Advice wrote a blog earlier this year that lists five PMO types and the reasons for adopting them. To help make some better sense of this, I’ve always kept a nine-structure model in mind, using the level within the firm that the PMO operates at on the y-axis, and the level of project management practitioner ownership on the x-axis, as shown in the figure below. Using three levels within each axis, it’s easy to draw boxes around the nine different combinations. While the actual names assigned to the PMOs may vary from firm to firm, I have found that just about every PMO—or firm considering implementing one --fits into one of these boxes.

The closer the PMO is to the lower left, the greater the focus is on individual projects, while the closer the PMO is to the upper right, the greater the focus is on the entire portfolio of projects. The top two rows, boxes 4 – 7, are permanent PMOs, whereas the bottom row, boxes 1 – 3, are temporary PMOs established for a particular project or program. Back in the late 1990s, many firms established temporary PMOs to provide project controls and reporting to top management about their Y2K initiatives. In some cases, the Y2K PMO was disbanded after the new millennium began, while in other cases the company realized the advantages of having a permanent PMO, and re-chartered it for that purpose.

Historical Uses and Current Trends of PMOs
When I was asked to start up a PMO for the first time in the mid-1990s, most were called Project Offices (“Management” wasn’t routinely added to the name until the 2000s), probably because most of them focused on project controls, processes, methodologies, tools and training; they also provided Project Controllers, Project Schedulers and/or Project Administrators but rarely had direct line responsibility for any Project or Program Managers. Most of the POs operated at the divisional/departmental level, which meant that type (or box) 4 was the most popular model.

When Y2K came along, a Y2K Program Manager, and possibly multiple Y2K Project Managers were added to the mix, shifting the PMO into one of the upper right of the graph (box 5, 6, 8 or even 9). After Y2K, some PMOs were shut down, while others retained or increased their areas of responsibility, along with ownership of Project and Program Managers.

Even though the majority of firms across multiple industries since Y2K have established a PMO somewhere in the organization, only the most visionary firms went all the way and adopted a type 9 PMO, which operates at the enterprise level and owns all of the project management practitioners. Even though the Project Management Institute has been a proponent of the “projectized” organization (see Chapter 2.1, Organizational Influences on Project Management, in A Guide to the Project Management Body of Knowledge, 5th Edition), most firms still stuck with their functional or weak matrix organizational structures; some became flatter in terms of management layers, but the basic structure was still intact. This was done for political reasons (i.e., retention of control within the functional silos); concerns about added overhead cost; the lack of understanding of the value that a projectized organization could bring to the firm; and simple fears about changing to something that was largely new and unproven. Many companies—especially in manufacturing—jumped on the Six Sigma bandwagon over a decade ago after Jack Welch popularized and institutionalized it at General Electric, but no similar evangelist existed for full-service, enterprise-based PMOs, so they never became the Next Big Thing in the business world.

The economic recession that began in 2008, and which still persists to a lesser extent today, has shifted the thinking about PMOs considerably. Many companies realized the added overhead of maintaining functional silos, and took the opportunity to restructure their organizations while simultaneously laying-off employees to cut costs. What is left is a corporate America that is leaner and meaner than it ever has been in its history—which has also had the effect of making them more projectized by default, and thus putting its projects and programs under heavier scrutiny. In 1995, it was the oddball company that cared about project portfolio management (PPM), but now few firms can afford to keep avoiding it. The biggest driver behind PPM is often demand and resource management at the portfolio level. The project volume (demand) has generally increased, while the capacity to execute those projects (resources) has in many cases decreased—especially with full-time employees, as more and more project work has become the domain of temporary/contract-based resources and outsourcing.

What hasn’t changed about PMOs is the constant pressure to demonstrate the value they add to the organization. If anything, the pressure has increased, and will continue to escalate as leadership teams are constantly under the gun to do more and more with less and less. The three biggest areas that concern most leaders about PMOs lately include the following:

  • How well is the PMO helping to transform the organization at a strategic level from disruption and innovation perspectives?
  • What is the PMO doing to help ensure the highest rate of adoption and utilization of the transformational changes?
  • What is our return on investment for the PMO?

PMOs that make the jump from a divisional/departmental level to the enterprise level not only have to focus on these concerns in general, but have to deal with them as a direct consequence of making the jump itself. PMOs have to start thinking and behaving strategically, not just tactically. Organizational change readiness and adoption is a huge issue for any PMO that will begin operating for the enterprise for the first time. Most of all, once at the enterprise level, the bright lights and microscopes of top management become much more intense and powerful. All PMOs—and especially enterprise PMOs—must continually justify their existence so they aren’t disbanded at the first sign of an economic dip that prompts mass layoffs.

Stay tuned: In my next blog, I'll discuss the metrics smart PMO leaders track in order to demonstrate PMO value.


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