TUESDAY 9 OCTOBER, 2007 Project Management - Setting the Standard Australian Institute of Project Management National Co

2. 2 Maturity Model Part of the attraction of PMOs is research that reveals that organisations that have had a PMO for more than a few years achieve higher project success rates than organisations with no PMO or a relatively new PMO. Part of this is probably due to the PMO having had time to develop enough credibility in effective delivery of basic services to have gathered organisational support to expand its range of offerings into more strategic areas. Various writers have developed maturity models – as guides for determining where the PMO currently is, and what it should do next. These models vary from the usual 5 level CMM type to one I’ve seen with 11 levels. In this paper I’ll use a 3 level model for simplicity. Basic – Maturing – Mature. The model is based around four factors: The vision expressed for the PMO in its Charter The focus & positioning of its people Its operation in terms of engagement with projects and business units The methods and metrics its uses Built into this framework will be an assessment of the PMO from a more value-oriented viewpoint, based on: The ability to integrate between and across project and operational issues. Integration is one of the core functions of a PMO at any level The degree of innovation that the PMO introduces into projects and operational areas The degree to which the PMO proactively intervenes in project and operational areas to maximise the value of investments in change. Part of the attraction of PMOs is research that reveals that organisations that have had a PMO for more than a few years achieve higher project success rates than organisations with no PMO or a relatively new PMO. Part of this is probably due to the PMO having had time to develop enough credibility in effective delivery of basic services to have gathered organisational support to expand its range of offerings into more strategic areas. Various writers have developed maturity models – as guides for determining where the PMO currently is, and what it should do next. These models vary from the usual 5 level CMM type to one I’ve seen with 11 levels. In this paper I’ll use a 3 level model for simplicity. Basic – Maturing – Mature. The model is based around four factors: The vision expressed for the PMO in its Charter The focus & positioning of its people Its operation in terms of engagement with projects and business units The methods and metrics its uses Built into this framework will be an assessment of the PMO from a more value-oriented viewpoint, based on: The ability to integrate between and across project and operational issues. Integration is one of the core functions of a PMO at any level The degree of innovation that the PMO introduces into projects and operational areas The degree to which the PMO proactively intervenes in project and operational areas to maximise the value of investments in change.

3. 3 Tactical roles Method development Training, coaching, mentoring Commissioning programs, projects Risk, issue, communication Project assurance and audit Matching project managers to project needs Sponsor training Innovation PMOs can innovate at a tactical level, by process innovation, and by ensuring that investments in training are supported by ongoing coaching and mentoring of project staff. An emerging area for PMOs is sponsor training, which arises from the observation that many project and program sponsors have an operational background and may not have the skills or mindset to act as effective governors of change initiatives. PMOs can innovate at a tactical level, by process innovation, and by ensuring that investments in training are supported by ongoing coaching and mentoring of project staff. An emerging area for PMOs is sponsor training, which arises from the observation that many project and program sponsors have an operational background and may not have the skills or mindset to act as effective governors of change initiatives.

4. 4 Basic The entry-level PMO in most organisations is usually located in a business unit usually the IT function, and its Charter is to primarily control costs and provide the IT Director or CIO with a consolidated view of the status of the IT-related project portfolio. Its focus is inward, and it believes that software tools are the answer. It treats each project as a separate entity, and gathers status reports. It may have very little insight into the minds of the business sponsors of the project portfolio, or authority to intervene into operational areas of the business, so it reactively concentrates on simple metrics such as on-time delivery. Its innovation focuses on improving the organisational project management method – project management, governance – and its own internal processes, hence its typical focus on software tools. Its integration focus is on consistent processes across projects, cross-project dependencies and milestones, and critical resource allocation. Overall, this PMO could be characterised as passive and reactive. The purpose of this presentation is to discuss new roles for such PMOs. The entry-level PMO in most organisations is usually located in a business unit usually the IT function, and its Charter is to primarily control costs and provide the IT Director or CIO with a consolidated view of the status of the IT-related project portfolio. Its focus is inward, and it believes that software tools are the answer. It treats each project as a separate entity, and gathers status reports. It may have very little insight into the minds of the business sponsors of the project portfolio, or authority to intervene into operational areas of the business, so it reactively concentrates on simple metrics such as on-time delivery. Its innovation focuses on improving the organisational project management method – project management, governance – and its own internal processes, hence its typical focus on software tools. Its integration focus is on consistent processes across projects, cross-project dependencies and milestones, and critical resource allocation. Overall, this PMO could be characterised as passive and reactive. The purpose of this presentation is to discuss new roles for such PMOs.

5. 5 More strategic roles Securing buy-in and accountability Strategic prioritisation Gateway reviews Dependency management Program schedule Resource allocation Program risk Communications Innovation But unless the PMO is seen to be continually adding value, rather than operating under cover, then it may be terminated too soon. The PMO needs to discharge its tactical roles effectively. The PMO can start taking a more strategic role by fostering shared understanding and cooperation, and focussing on the key issues impacting successful project delivery in a multi-project environment. At a more strategic level, innovation is focussed on insight. The key opportunities for strategic innovation occur in program and project initiation and scoping phases. The Gateway Review process is not intended to be an audit activity; it is meant to be a value-adding exercise to ensure that sponsors and change architects have explored alternative approaches to the problem in hand. For the PMO, innovation may not be a quantum leap in understanding or outcome, but could just as effectively be the creation of an environment supportive of effectiveness. This requires encouraging a culture characterised by cooperation and openness to ideas outside a narrow function or discipline focus. The role of a maturing PMO can not be as a passive observer. Its mandate requires ownership of some responsibility that would otherwise be held at project or functional group level. And a PMO that rolls over to pressure will quickly lose strategic value and will be perceived as unnecessary. But unless the PMO is seen to be continually adding value, rather than operating under cover, then it may be terminated too soon. The PMO needs to discharge its tactical roles effectively. The PMO can start taking a more strategic role by fostering shared understanding and cooperation, and focussing on the key issues impacting successful project delivery in a multi-project environment. At a more strategic level, innovation is focussed on insight. The key opportunities for strategic innovation occur in program and project initiation and scoping phases. The Gateway Review process is not intended to be an audit activity; it is meant to be a value-adding exercise to ensure that sponsors and change architects have explored alternative approaches to the problem in hand. For the PMO, innovation may not be a quantum leap in understanding or outcome, but could just as effectively be the creation of an environment supportive of effectiveness. This requires encouraging a culture characterised by cooperation and openness to ideas outside a narrow function or discipline focus. The role of a maturing PMO can not be as a passive observer. Its mandate requires ownership of some responsibility that would otherwise be held at project or functional group level. And a PMO that rolls over to pressure will quickly lose strategic value and will be perceived as unnecessary.

6. 6 Maturing As the PMO becomes more credible, and provides value to senior managers outside the IT function, its role will expand to better align with organisational strategy. Its adoption of higher-order management methods such as MSP will see its focus move to programs and benefits, which starts to move its activities into operational areas of the business. It starts to intervene in portfolios and programs, and adopts more effective methods and metrics such as MSP and earned value performance management. Its innovation focuses on improving the program’s project portfolio and the benefits that will be delivered. Its integration focus is on aligning the project portfolio with strategy, and effective communication of major change efforts (Chris Barkes’ comment re Brit Army pgm). Because programs frequently interact with multiple functional areas, and hand over capabilities to operational staff for ongoing use and management, the PMO’s role as integrator must also extend into operational issues. As the PMO becomes more credible, and provides value to senior managers outside the IT function, its role will expand to better align with organisational strategy. Its adoption of higher-order management methods such as MSP will see its focus move to programs and benefits, which starts to move its activities into operational areas of the business. It starts to intervene in portfolios and programs, and adopts more effective methods and metrics such as MSP and earned value performance management. Its innovation focuses on improving the program’s project portfolio and the benefits that will be delivered. Its integration focus is on aligning the project portfolio with strategy, and effective communication of major change efforts (Chris Barkes’ comment re Brit Army pgm). Because programs frequently interact with multiple functional areas, and hand over capabilities to operational staff for ongoing use and management, the PMO’s role as integrator must also extend into operational issues.

7. 7 Strategy implementation Disconnect between strategy formulation and strategy execution Strategic plans but no strategy execution process ‘Office of Strategy Management’. In a recent article in the Harvard Business Review, Kaplan and Norton [10] say that their research has indicated a persistent disconnect in most companies between strategy formulation and strategy execution. They have also found that most organizations do not have a strategy execution process. Many have strategic plans, but no coherent approach to manage the execution of those plans. They promote the concept of an ‘Office of Strategy Management’ as the mechanism for closing this gap. Director of Strategy of a major Vic Govt Dept: good at generating consensus around strategy across the sector the Dept served, but poor at delivery, and this doesn't mean project management. It’s about closing the gap between concept and action. It is the contention of this section that strategic program management provides the basis for a strategy execution process, and that an enterprise-level PMO can take on this role of ‘Office of Strategy Management’. In a recent article in the Harvard Business Review, Kaplan and Norton [10] say that their research has indicated a persistent disconnect in most companies between strategy formulation and strategy execution. They have also found that most organizations do not have a strategy execution process. Many have strategic plans, but no coherent approach to manage the execution of those plans. They promote the concept of an ‘Office of Strategy Management’ as the mechanism for closing this gap. Director of Strategy of a major Vic Govt Dept: good at generating consensus around strategy across the sector the Dept served, but poor at delivery, and this doesn't mean project management. It’s about closing the gap between concept and action. It is the contention of this section that strategic program management provides the basis for a strategy execution process, and that an enterprise-level PMO can take on this role of ‘Office of Strategy Management’.

8. 8 Strategic Change In a paper presented at last year’s ProMAC Conference [2], a Strategy Implementation Framework based on MSP was introduced. This diagram represents a general strategy development and implementation framework. Describe features: Phases across the top Moving organisation from as-is to to-be states Process model Governance Some processes supported by project management methods A strategy lifecycle is show across the top, from Assessing the organisation’s internal and external environments at the left, and Envisioning the desired future for the organisation at the left, through various implementation phases in the centre mediated by the MSP program management method, to Measuring and Monitoring progress and Evaluating outcomes at the right. In the column below each of the phases are identified the key activities that occur. The ‘Linking’ and ‘Designing’ steps are the ones that are poorly executed in many organisations, and that actually generate the so-called alignment problem. In a paper presented at last year’s ProMAC Conference [2], a Strategy Implementation Framework based on MSP was introduced. This diagram represents a general strategy development and implementation framework. Describe features: Phases across the top Moving organisation from as-is to to-be states Process model Governance Some processes supported by project management methods A strategy lifecycle is show across the top, from Assessing the organisation’s internal and external environments at the left, and Envisioning the desired future for the organisation at the left, through various implementation phases in the centre mediated by the MSP program management method, to Measuring and Monitoring progress and Evaluating outcomes at the right. In the column below each of the phases are identified the key activities that occur. The ‘Linking’ and ‘Designing’ steps are the ones that are poorly executed in many organisations, and that actually generate the so-called alignment problem.

9. 9 Strategic Change through Programs Last year’s paper showed how the MSP program management method could effectively fill in many of the gaps in most organisation’s approaches to strategy implementation. MSP provides a robust process for scoping, defining, designing and governing major strategic change initiatives. MSP in particular make the point that program managers cannot be held accountable for benefits realisation. This is one of the roles of the operational sponsors of the program – to take the new capabilities delivered by the program and generate value from them. But MSP says quite clearly that PMOs have a major role in supporting both project managers and operational managers in achieving the objectives of the program – strategic change delivering benefits to the organisation. To do this, MSP says PMOs must track benefits beyond the completion of the program across the operational life of these capabilities. Last year’s paper showed how the MSP program management method could effectively fill in many of the gaps in most organisation’s approaches to strategy implementation. MSP provides a robust process for scoping, defining, designing and governing major strategic change initiatives. MSP in particular make the point that program managers cannot be held accountable for benefits realisation. This is one of the roles of the operational sponsors of the program – to take the new capabilities delivered by the program and generate value from them. But MSP says quite clearly that PMOs have a major role in supporting both project managers and operational managers in achieving the objectives of the program – strategic change delivering benefits to the organisation. To do this, MSP says PMOs must track benefits beyond the completion of the program across the operational life of these capabilities.

10. 10 Processes supported by PMO The Framework is now expanded to show the roles that could be taken on by a PMO. MSP ascribes a very broad role to PMOs in supporting programs. Partly this is because MSP’s view is that a Program Manager does not necessarily have to be a project management professional, but could be a senior executive able to frame and guide the program. Which means the PMO Manager’s scope increases – to actually take on many of the execution activities. The diagram now also identifies where a PMO might be able to support strategy implementation either fully (the boxes outlined in a solid bold line) or partially (boxes with a dashed bold outline). In MSP, the Blueprint is a description in operational terms of the desired future state of the organisation. It is usually the most complex aspect of the MSP approach to strategic program management, because it frontloads the critical process of internal organisational discussion and debate about alternatives. Many organisations find that multiple alternative Blueprints must be maintained, until a decision can be made about which represents the consensus view as to the optimum approach. A PMO could assist greatly in this process by supplying the business architects and facilitators required, and managing the configurations of artefacts generated. In MSP, a PMO will generally be responsible for ‘establishing and maintaining’ the program’s governance arrangements, including strategies for resourcing, risk management, quality, and so on. PMOs have an obvious role in supporting the organisational structures and roles responsible for program governance. Many organisations are becoming interested in benefits realisation. In MSP, planning for benefits starts with the development of a Benefits Model and supporting Benefits Profiles. The Benefits Model will eventually provide traceability between the organisation’s strategic objectives, through various benefits identified and the capabilities that must be in place for these benefits to be realised, to the enabling projects and other initiatives that will provide these capabilities. This is a non-trivial exercise for a major strategic program, and can be supported by a PMO. The PMO will establish and maintain the benefits register, and will ensure that benefits are properly counted and attributed in the business cases of the portfolio. A PMO would take on the usual role of coordinating stakeholder engagement activities such as communication activities. A mature PMO could also task business analysts to work with impacted operational executives to establish business change plans for their areas. Such a PMO acts as a business partner, driving the project portfolio to deliver capability that operational managers can use to deliver benefits. A classic role for PMOs is to capture and report metrics that track the progress of projects and programs. MSP extends this to include tracking benefits to be realised in operational areas. Finally, PMOs also have a classic role in arranging and facilitating reviews of the current state of the organisation at the end of projects and tranches of programs, to support possible mid-term corrections to the strategy implementation program. The Framework is now expanded to show the roles that could be taken on by a PMO. MSP ascribes a very broad role to PMOs in supporting programs. Partly this is because MSP’s view is that a Program Manager does not necessarily have to be a project management professional, but could be a senior executive able to frame and guide the program. Which means the PMO Manager’s scope increases – to actually take on many of the execution activities. The diagram now also identifies where a PMO might be able to support strategy implementation either fully (the boxes outlined in a solid bold line) or partially (boxes with a dashed bold outline). In MSP, the Blueprint is a description in operational terms of the desired future state of the organisation. It is usually the most complex aspect of the MSP approach to strategic program management, because it frontloads the critical process of internal organisational discussion and debate about alternatives. Many organisations find that multiple alternative Blueprints must be maintained, until a decision can be made about which represents the consensus view as to the optimum approach. A PMO could assist greatly in this process by supplying the business architects and facilitators required, and managing the configurations of artefacts generated. In MSP, a PMO will generally be responsible for ‘establishing and maintaining’ the program’s governance arrangements, including strategies for resourcing, risk management, quality, and so on. PMOs have an obvious role in supporting the organisational structures and roles responsible for program governance. Many organisations are becoming interested in benefits realisation. In MSP, planning for benefits starts with the development of a Benefits Model and supporting Benefits Profiles. The Benefits Model will eventually provide traceability between the organisation’s strategic objectives, through various benefits identified and the capabilities that must be in place for these benefits to be realised, to the enabling projects and other initiatives that will provide these capabilities. This is a non-trivial exercise for a major strategic program, and can be supported by a PMO. The PMO will establish and maintain the benefits register, and will ensure that benefits are properly counted and attributed in the business cases of the portfolio. A PMO would take on the usual role of coordinating stakeholder engagement activities such as communication activities. A mature PMO could also task business analysts to work with impacted operational executives to establish business change plans for their areas. Such a PMO acts as a business partner, driving the project portfolio to deliver capability that operational managers can use to deliver benefits. A classic role for PMOs is to capture and report metrics that track the progress of projects and programs. MSP extends this to include tracking benefits to be realised in operational areas. Finally, PMOs also have a classic role in arranging and facilitating reviews of the current state of the organisation at the end of projects and tranches of programs, to support possible mid-term corrections to the strategy implementation program.

11. 11 Office of Strategy Management The end result sought from strategic programs is represented by the benefits realisable as a result of the organisation’s investment in the program. Thinking of programs as alternative investment choices leads to thinking more generally on how an organisation maximises the value it receives from its investments in change generally. The ePMO is in a unique position to deliver on value realisation because of its exposure to both strategic and tactical execution. By being witness to strategic planning exercises and being responsible for the project portfolio, the ePMO plays a critical role. Over time, it will develop a view of the organisation’s capacity and capability to generate effective change, which will improve the reliability and credibility of future investment proposals. By developing best practices in project initiation and portfolio and project management, as well as providing a reporting and analysis structure, the ePMO provides the foundation to allow an organisation to extract the requisite data to demonstrate benefits realisation. Through internal consulting and promotion, the ePMO can also assist in transforming organisational culture to make value measurement standard practice. According to John Thorp [8], in this model, the ePMO becomes the secretariat for the organisation’s investment review board. As a consequence, we can make a final notation to the Strategy Implementation Framework, where the ePMO takes on the role of establishing, maintaining and monitoring the organisation’s Balanced Scorecard, including recommending or even initiating interventions in to ensure maximisation of value realisation. In Kaplan and Norton’s terminology, a ‘Strategy Management Office, or in Thorp’s terminology, a Value Management Office. A PMO equipped to act as an effective integrator, driver of innovation and with a capacity for a delicate touch in intervention, can provide an effective review and alignment function between capability development and the evolving corporate strategy. Strategic ePMOs could also have the potential to lead the capital allocation and prioritisation process, but to do this they would probably need to report to the CEO [9] or at least have strong C-level sponsorship. Few current ePMOs have a genuine strategic function, with a mandate to control all projects [9]. This means that in most organisations, projects are being controlled by operational managers.The end result sought from strategic programs is represented by the benefits realisable as a result of the organisation’s investment in the program. Thinking of programs as alternative investment choices leads to thinking more generally on how an organisation maximises the value it receives from its investments in change generally. The ePMO is in a unique position to deliver on value realisation because of its exposure to both strategic and tactical execution. By being witness to strategic planning exercises and being responsible for the project portfolio, the ePMO plays a critical role. Over time, it will develop a view of the organisation’s capacity and capability to generate effective change, which will improve the reliability and credibility of future investment proposals. By developing best practices in project initiation and portfolio and project management, as well as providing a reporting and analysis structure, the ePMO provides the foundation to allow an organisation to extract the requisite data to demonstrate benefits realisation. Through internal consulting and promotion, the ePMO can also assist in transforming organisational culture to make value measurement standard practice. According to John Thorp [8], in this model, the ePMO becomes the secretariat for the organisation’s investment review board. As a consequence, we can make a final notation to the Strategy Implementation Framework, where the ePMO takes on the role of establishing, maintaining and monitoring the organisation’s Balanced Scorecard, including recommending or even initiating interventions in to ensure maximisation of value realisation. In Kaplan and Norton’s terminology, a ‘Strategy Management Office, or in Thorp’s terminology, a Value Management Office. A PMO equipped to act as an effective integrator, driver of innovation and with a capacity for a delicate touch in intervention, can provide an effective review and alignment function between capability development and the evolving corporate strategy. Strategic ePMOs could also have the potential to lead the capital allocation and prioritisation process, but to do this they would probably need to report to the CEO [9] or at least have strong C-level sponsorship. Few current ePMOs have a genuine strategic function, with a mandate to control all projects [9]. This means that in most organisations, projects are being controlled by operational managers.

12. 12 Strategic PMO Manager Leadership backed by specialist skills Credibility with senior executives Deliver results they value Flexible in approach but tenacious hold on principle Business acumen; commercial experience And it requires a PMO Manager with the ability to operate effectively with those higher layers of management, understand their needs, and deliver value in their terms. A possible problem has been identified in a recent survey, in which KPMG [9] found that the leadership of many PMOs lacked strong business acumen and commercial training. A low profile PMO that rolls over to pressure quickly loses strategic value and may soon be perceived as unnecessary. And it requires a PMO Manager with the ability to operate effectively with those higher layers of management, understand their needs, and deliver value in their terms. A possible problem has been identified in a recent survey, in which KPMG [9] found that the leadership of many PMOs lacked strong business acumen and commercial training. A low profile PMO that rolls over to pressure quickly loses strategic value and may soon be perceived as unnecessary.

13. 13 The end game? Drive strategic prioritisation Challenge strategic priorities Drive benefits planning and realisation Convene and facilitate alignment activities Review project plans and direct modifications Push consolidation and restructuring of change initiatives Drive delivery and benefit realisation Initiate Gateway and Benefit Reviews The PMO as a proactive agent acting for the senior executive team must intervene to drive execution. The PMO as a proactive agent acting for the senior executive team must intervene to drive execution.

14. 14 Mature So now, if we return to our maturity model, we can begin to describe what a PMO operating at this level might look like. It will report directly to a C-level executive such as the CEO or CFO, it will be an important supporting player in business strategy, with sufficient influence to arrange termination of projects that have drifted too far from organisational strategy or are no longer capable of delivering the benefits promised in their business cases. The focus of such a PMO will be on the search for value. So now, if we return to our maturity model, we can begin to describe what a PMO operating at this level might look like. It will report directly to a C-level executive such as the CEO or CFO, it will be an important supporting player in business strategy, with sufficient influence to arrange termination of projects that have drifted too far from organisational strategy or are no longer capable of delivering the benefits promised in their business cases. The focus of such a PMO will be on the search for value.

15. 15 Conclusion An enterprise PMO that is An effective integrator of project and operational worlds A driver of tactical and strategic innovation Able to provide delicate but decisive intervention adds value by delivering best practice in Strategy implementation governance Program and project initiation Benefits modelling and realisation Oversight, reporting and analysis to Transform organisational culture Maximise value delivery. The enterprise PMO should become a proactive agent acting for the senior executive team to drive strategy implementation. An enterprise PMO equipped to act as a effective integrator, driver of innovation and with a delicate touch in intervention, can provide an effective review and alignment function between the new capabilities being sought and evolving organisational strategy. By moving to best practice in strategy implementation, program and project initiation and management, benefits modelling and tracking, as well as providing a sound governance, reporting and analysis structure, the ePMO provides the foundation to allow an organisation to extract the requisite data to maximise benefits realisation. Through internal consulting and promotion, the ePMO can also assist in transforming organisational culture to make value measurement standard practice. The enterprise PMO should become a proactive agent acting for the senior executive team to drive strategy implementation. An enterprise PMO equipped to act as a effective integrator, driver of innovation and with a delicate touch in intervention, can provide an effective review and alignment function between the new capabilities being sought and evolving organisational strategy. By moving to best practice in strategy implementation, program and project initiation and management, benefits modelling and tracking, as well as providing a sound governance, reporting and analysis structure, the ePMO provides the foundation to allow an organisation to extract the requisite data to maximise benefits realisation. Through internal consulting and promotion, the ePMO can also assist in transforming organisational culture to make value measurement standard practice.

16. 16 Questions www.goalgroup.com.au 04 0701 1077 grankins@goalgroup.com.au