A PMO (which can stand for a project management organization, a program management organization, or a portfolio management organization) can be a valuable department within an organization. However, the establishment and sustainability of PMOs are marred by stories of success and failure, depending on which organization you analyze.
The history of the PMO spans back decades, so this structure is not something entirely new. Traditionally, they began to support a single myopic program and then evolved to an organizational focus. Today, PMOs can take a variety of structures and focuses. There are Compliance PMOs, IT PMOs, Finance PMOs, and Enterprise PMOs which offer a variety of services to the organization. The service mix a PMO chooses will be crucial in determining eventual success or failure.
Three Reasons Why PMOs Fail:
In my experience, I have stood up PMOs, been a part of successful PMOs, and watched PMOs fail. Gartner has noted here that PMO establishment has an implementation failure rate of more than 50% since 2008. This is quite disturbing and stresses the importance of understanding the failures before establishing or assuming the leadership of a PMO.
Notwithstanding the industry or organization, there are some common factors which will lead to PMO failure and eventual disbandment. Please note that these are my personal observations based on multiple industry and company experiences:
- Value Proposition: Many PMOs fail because they have an unclear or negative value proposition. This, in turn, will result in a lack of senior leadership commitment to the entity. The main root causes are from a lack of strategic focus and/or poor reporting. If a PMO cannot quantitatively demonstrate its value to the organization, it will be considered another line item in the operating expense structure and be at risk of being low hanging fruit for a subsequent cost saving initiative.
- Service and Goal Misalignment: A PMO, like any other shared service, must have defined services which it offers the organization. Ideally, these services should be aligned to the organization’s goals and objectives. However, when there is a misalignment, the services offered by the PMO do not directly correlate to these goals. Take, for example, if a PMO primarily offers administrative (e.g. meeting minutes, project coordinators) support along with a bureaucratic methodology and the organizational objectives include margin and market share improvement. In this situation, the PMO will likely be viewed as a cost center and be one of the first departments on the chopping block when difficult times are encountered.
- Ineffective Staffing: The staffing should align to the services the PMO currently offers and also those on the near term horizon. When they don’t, the PMO cannot deliver on its stated services. For example, if the PMO offers strategic program management and portfolio management, yet hires many task manager types, the service will not be delivered in an optimal manner.
Three Reasons Why PMOs Succeed:
PMO success is driven by effective partnership and relationship building between the PMO, IT, and the business functions. These relationships will foster a culture of trust for the PMO and establish credibility for the function. For a PMO to succeed, in addition to effective relationships, they must accomplish the following:
- Executive Partnership and Empowerment: Either the PMO is led by a credible executive or the PMO head has the proper relationship with powerful/influential executives within an organization. The PMO has to be empowered by senior leadership to oversee processes and make decisions to accomplish the goals they were chartered for. If not empowered, the executive trust does not exist and the PMO will not be flexible enough to respond to organizational needs.
- Effective Portfolio Management: Assuming the PMO is empowered and credible, they should have some authority to manage the portfolio of project investments for the enterprise. Managing the portfolio effectively involves controlling the business case intake, managing enterprise resources, prioritizing projects that deliver significant benefits and are aligned to company strategic objectives, and establishing governance. Portfolio management will allow the PMO to stay relevant as strategic objectives change.
- Mastering the Narrative: Metrics are an important part of every story. The PMO is no different. To be successful, the PMO has to demonstrate its value with metrics that are meaningful to the organization. This usually does not include Earned Value metrics, as they do not have much meaning outside of PM. This does include demonstrating that projects/programs are delivered on time and on budget, compiling the cost savings, process improvements, and new revenue that the PMO has delivered. Personally, for the savings and revenue, I demonstrate this as a multiple of the PMO total operating expense to drive the narrative that the department is a force multiplier.
-Jonathan Ozovek
