The opening day of the Project Zone Congress  included a full day track focused on Project Portfolio Management.  The quality of the presentations made it one of the most interesting day’s I’ve spent in a very long time!

The presentations linked the critical importance of a strategic PMO to effective portfolio management and PPP governance.  The importance of ‘doing the right projects’ was highlighted by a presentation from SAP; 20% of the world’s business involves one organisation delivering a ‘project’ to another organisation, and then there is the increasing tendency for organisations to achieve growth and change by commissioning internal project.

The first key message from the day was the vital importance of each organisation developing a realistic and achievable ‘strategic road map’, with specific milestones, that define how the organisations strategy will be achieved.  Most organisations have a high level strategy, very few have a pragmatic plan for the next 1 to 2 years describing exactly what will be done towards achieving the overall strategy in that timeframe.  Developing this practical implementation plan (still at a reasonably high level) is difficult work for the executives involved.  However, once the plan is agreed it becomes the key tool for implementing effective portfolio management decision making to select the projects and programs that contribute most strategic value.  Building this capability is a key governance issue!

The next key message is that developing the ‘road map’ and then accepting portfolio investment decisions based on the ‘road map’ requires discipline and cannot occur without strong executive level support.  Manager’s ‘pet projects’ are always an issue!

One very useful idea was using the ‘road map’ and portfolio management to assess projects at the ‘idea’ stage – a standard one-page outline of the concept being proposed.  If the concept fits into the ‘road map’ and looks feasible it is approved for developing a business case and planning, if it does not, it is rejected before much investment of time and effort has occurred. A much easier decision!! The process needs to be disciplined but not ridged – a degree of flexibility is essential to allow effective responses to market changes and regulatory changes.

The concept of value was also discussed – projects need to be assessed on their contribution to achieving strategic objectives as well as financial factors. Value is far more than just dollars!!

Probably the strongest message for me was the importance of concise information in modifying behaviours.  An effective strategic PMO can have a huge effect on executive decision making simply by informing the executive of the ‘road map’ and of the effect any decision will have on the organisations overall journey towards its strategic objectives – good information really does lead to good decisions (and makes defending a ‘pet project’ very difficult – no one like to look too disruptive).

The importance of the routine aspects of portfolio management were not ignored (see more on portfolio management), understanding capability and capacity, the effect of queuing theory slowing everything down if too much work is approved  was discussed, and the importance of effective surveillance of projects in progress were all covered.  And my presentation on Portfolio governance and risk – its all about the stakeholders was well received. 

A key closing thought is do not underestimate the time and effort needed to change organisational culture to facilitate effective strategic planning at the ‘road map’ level linked to portfolio management and the creation of an effective strategic PMO.  Most presenters had  spent 3 to 5 years building the capability within their organisations and were still working on the executive ‘culture’ to achieve the outcomes they were describing.  The good news is that it is worth the effort; the SAP presentation quoted data showing an increase in profit of between 2% and 5% of the organisations turnover associated with implementing effective portfolio governance.

Value is created through the alignment of projects with the goals of the organisation and best-practice PMOs go beyond alignment with strategic initiatives; they are involved in creating and implementing organisational strategy.

The type of measurements that matter in this environment focus on measures such as ‘Return on investment (ROI)’, benefits realised, risk profiles and payback periods. Simplistic measures such as time and cost performance, use of processes, courses run and the number of qualifications achieved are not sufficient; and in themselves are largely irrelevant.

Processes and staff training are a means to an end, not an end in themselves! What matter is measures that demonstrate the qualified staff, applying the processes, are more effective at delivering valuable outcomes. Good processes improve efficiency and reduce error; bureaucratic processes reduce efficiency and drive up costs (see more on process improvement).

But even that is not enough! These elements only look at doing projects ‘right’. Successful PMO leaders cite project alignment to strategic objectives as the top-rated PMO function that has the greatest potential for adding real business value to their organisational activities.

As part of PMI’s Thought Leadership Series, PMI in partnership with the Economist Intelligence Unit, Boston Consulting Group and Forrester Consulting, has examined the changing role of PMOs as they shift emphasis away from process and towards the more important role of contributing to value delivery. Their reports can be downloaded from: http://www.pmi.org/Knowledge-Center/PMO-Thought-Leadership.aspx

There’s a lot of reading in these reports – maybe a good use of any excess holiday time…..

For more of out thoughts on PMOs see: http://www.mosaicprojects.com.au/PM-Knowledge_Index.html#OrgGov4

Whilst PMOs have been popular since the middle to late 1990’s and new PMOs are being created at a relatively high rate; PMOs are also being shut down or radically reconfigured at a similar rate. As shown in the figure below most PMOs in existence today are rather recent creations. The sample suggests more than half the PMOs in existence today (54%) were created in the last two years and only 17% have been in existence for more than five years.

This data suggests a PMO often has only a short time to demonstrate its ability to fit into the organisations culture and create value before it is restructured or closed down. We have looked at some of the issues and challenges associated with PMOs in a Mosaic White Paper ‘PMOs’.

Based on years of observation, the key to achieving an effective start up for a PMO has more to do with the PMO’s management being able to effectively manage their key stakeholders, particularly in the executive suites than any methodology or reporting processes the PMO may import or develop. For more on this see the numerous papers we have published [paper listing]. The key message is technical competence is never going to be enough to justify the existence of a PMO.

The first was a short article in our local paper praising a much delayed decision by our local council to erect warning signs on some local beaches. The signs would ‘save lives’. Interestingly, I have never seen a sign rescuing anyone! The ocean is inherently dangerous – it’s full of deep water that’s frequently rough. The only way a sign could possible contribute to beach safety is if;
i. A person going onto the beach is unaware of the inherent danger,
ii. Sees and reads the sign,
iii. Believes the information and changes their intended actions to avoid the danger.

The second was a post I made to a very long running Linked-In debate on measuring the effectiveness of Earned Value Management. 90% of the responses focused on accuracy. Accuracy is an important characteristic of the data. However, perfectly accurate data is as useless as complete rubbish if the information is not used. The effectiveness of EVM can only be assessed based on its contribution to effective decision making that leads to the creation of value. To paraphrase a quote from my paper Scheduling in the Age of Complexity  ‘Useful systems are useful because they are used!’ (existence is not enough).

The third was a discussion in the PMP class we are running this week on PMOs and in particular the short life of many PMOs in organisations.

On reflection, my feeling is the failure of many PMOs is directly linked to their inability to make project controls data into useful management information. If the PMO was perceived by senior management as the source of very useful information they (the senior managers) need to govern the organisation they would never consider closing it.

This has a number of connotations:

1. The PMO needs to be ale to communicate effectively in terms that are relevant to senior management
2. The PMO needs to be able to translate project data into management information.
3. The PMO needs to make sure the information is available where and when needed by the senior management team.
4. The PMO needs to be trusted by the senior management team to provide relevant, accurate and useful information.

In my experience, most PMO managers and staff are project controls experts and/or system administrators skilled in running the PMOs tools. Their skills are in the wrong direction. Certainly the PMO needs to some technically competent staff but its management need to be effective operators in the organisations executive management space.

Communicating and advising upwards is a different skill set and one we are working on defining and developing capabilities in. Our new workshop The Science and Art of Effective Communication focuses on ‘advising upwards’ as does Dr. Lynda Bourne’s new book: Advising Upwards: A Framework for Understanding and Engaging Senior Management Stakeholders due for publication in 2011.

What are your thoughts and where should the balance lie?

I have just wasted 15 minutes trying to respond to a survey commissioned by our local city council. The structure of the survey was so bad there is no way the data collected would allow any useful information to be gathered. Two of the questions (from memory) were:

• ‘Overall how do you rate the Port Phillip City Council’s performance’ with a range of 5 options from bad to excellent. Sound like an insightful question but what does the answer tell anyone?? The Council delivers a wide range of totally separate services from refuse collection to maternal and child welfare. Any overall answer is meaningless; unless the Councillors are spending rate payer’s money on a ‘feel good’ ego trip and hope they will be rated ‘good’. It does not matter if the answer is bad, good or indifferent unless the data collected identifies what is good or bad so management action can be taken to lock in the good and improve the bad.
• “How do you rate the street cleaning service overall?”  More specific but still useless data. The council cleans shopping strips on a daily basis, other roads on an occasional basis and numerous lanes and footpaths very rarely. My answer was shopping strips great, major roads OK, side roads like the one I live in fairly poor and the laneways are a total disaster….. But how would I rate the service overall??? At this point I terminated the interview!

  Overall rating should be complied from specific measurements weighted appropriately. In this case a weighted assessment of the relative importance of clean shopping strips -v- clean local streets -v- clean laneways to the local citizens. How do you assess the weightings? Ask a sample group of people which they feel is more important on a comparative basis before running the survey. Then collect specific data and build some useful information that can help direct improvements in the overall service.

When designing this sort of data gathering, you also need to filter out influences like staff culture (the Port Phillip staff are really great and helpful) from systemic issues such as the contract conditions the street cleaning contractor operates under.

Then by compiling all of the various rating for the specific services, an overall rating for the council could be compiled and more importantly the high performing areas noted and lessons from these areas transferred to the less well performing areas.

There’s a lot to learn from this example of bad surveying. Designing surveys and collecting data is not a trivial exercise. There is nothing simpler than bogging a PMO down collecting masses of data that can never be converted into useful information. Do this and the PMO will be seen as a useless bureaucracy and sooner or later it will be reorganised out of existence.

Focus the data collection on a limited range of key factors that can provide useful management information and the PMO will be seen as a real value add to the business.

So how do you rate your PMO overall?     Only kidding…..

On a closing note –
The number of really bad surveys seem to be increasing exponentially – I think around 80% of the various project management surveys I look at, mostly from post graduate students, seem to be either designed to support a pre-determined answer or so badly designed the data could be interpreted to suit any answer the researcher chooses. There is a real discipline and skill in developing an effective survey; unfortunately it’s a skill that seems to be in very short supply.

Victorian hospitals are rewarded for good performance and fined for poor performance. One measure being the length of waiting lists another is the time patients wait in casualty/emergency area before admittance. Rumours have been circulating for several months that some administrators were manipulating data to avoid fines and win bonuses – both adjusted against the hospital’s funding for the year (ie, no one personally benefitted from the manipulation). An audit report has confirmed many of the rumours and has found behaviours that in many cases are worse for the patients and worse of the hospital than if nothing had occurred.

One example is transferring patients from emergency care to the operating theatre waiting area to avoid a fine for failing to admit the patient within the prescribed maximum time. The consequences of this action include:

• The patient being removed from an area focused on emergency care to an area with little monitoring capability – a reduction in care to the patient.
• The reduction in throughput in the operating suites due to overcrowding and skilled theatre staff having to spend time on patient care rather than operations.
• A net reduction in the overall delivery of service by the hospital; but improved statistical reports to Government.

This farce was in the interests of everyone except the people the Government and hospital are supposed to serve, the public needing hospital care. Some of the vested interests include:

• The government’s desire to look good by reducing waiting time.
• The hospitals desire to achieve the maximum budget income for the year.
• The administrators’ desire , both in the hospital and the government, to avoid ‘rocking the boat’.
• The built in bias in government spending to fully spend each year’s budget allocation.

Apart from the obvious issue around the intelligence of a system that removes funding from an institution that probably needs more funding to meet the demands on its services – the only practical way to treat more patients is to provide more beds and staff which cost money… there are a number of important lessons for all PMO managers to consider when setting up ‘project dash boards’ and the like:

• What you measure will change behaviours. Focus on things that matter like value and benefits not easy to measure statistics like time.
• Make sure the data you use is validated.
• Identifying a problem is not enough! You should work with the project team and management to make sure an effective solution is crafted. It’s not the PMOs job to solve the problem but it can be a powerful facilitator of solutions by measuring the right statistics and asking the right questions.

This is a more challenging role but also one that can really contribute to the overall performance of you organisation.

For more on this topic see:

• Reports on the problem from the Age newspaper
• Blog – Value is in the eye of the Stakeholder
• Mosaic’s Published Papers focused on PMOs