Mel Bost – PMO Expert

The usual way that Program Management Offices (PMO) impact the firm’s strategy is through the execution of their “value proposition.”  The execution of projects yields tangible, concrete assets; new processes; or principles of operation that guide the firm and add long term value to the shareholders.  This blog post addresses how PMOs can more effectively deliver long term value and create a competitive advantage for the company. 

In recent blog posts, I have discussed:

o  “Best practices” in a project context

o  “Evolution” of PMOs from a “cost center” IT PMO perspective to enterprise PMOs to specialized PMOs to satisfy specific special business/functional needs in an organization

o  “Reframing” project scenarios to ensure we are tackling the right problem with a project; and

o  Design of PMO structures and functions using a “clean sheet of paper” approach

In this post, I want to leverage the insights of Professor C.K. Prahalad, a management and strategy guru who was recognized worldwide for his strategic intent, core competency and “bottom of the pyramid” theories, who died suddenly on April 16th.  He was a university professor in the Ross School of Business at The University of Michigan (which was my MBA program). 

In an April 2010 article/column entitled “Best Practices Get You Only So Far,” Prahalad discussed “innovation” in corporations from the perspective of looking beyond “best practices” to find what he termed ”next practices,” those cutting edge initiatives that will lead to sustained competitive advantage in a changing world and marketplace. 

This blog is in a sense a tribute to his contribution to strategy and management practice as I apply his principles to the Program Management Office (PMO).

Prahalad argued in this HBR column that today’s top management is too narrow in its focus to see “best practices” and must refocus their initiatives to uncover “next practices.”

He advocates that top management ask six questions in this search for “next practices:”

1.  Is the problem widely recognized?

2.  Does the problem affect other industries?

3.  Are radical innovations needed to tackle the problem?

4.  Can tackling the problem change the industry’s economics?

5.  Will addressing this issue give us a fresh source of competitive advantage?

6.  Would tackling this problem create a big opportunity for us?

In an earlier blog post, we cited the fact that Progress Energy–the utility that serves portions of North Carolina and Florida–had launched a Smart Grid Program Management Office (SGPMO). 

Why did they do this?

The logical answer was that they anticipated that the interest in Smart Grid would result in major project initiatives, not only for their own organization but for other contributing and supporting organizations such as General Electric.   Smart Grid would touch the lives of not only the electricity community but the customers and all stakeholders who have an interest in the application of SG technology.  Smart Grid would be an “evolving” concept because “the more you learn about what you don’t know about it, the more inclined you are to change direction with regard to subsequent actions.”

In other words, the six questions that Prahalad proposed we ask of a “problem” facing an industry and its stakeholders would surely lead to competitive advantage for someone–why not Progress Energy?

So defining a Smart Grid Program Management Office (PMO) was a very “smart” thing to do when faced with all the unknowns about how Smart Grid would play out.

The same could be said of Apple creating a PMO for its financial organization, reporting to its CFO.  The rapid product development that Apple has undertaken in recent years, including the recent introduction of the iPad, meant that the “problem” was how to mass produce sophisticated products that could still meet low cost requirements and a margin that would sustain Apple’s viability.

Many organizations engaging in a ”next practice” analysis will find that establishing a PMO will provide them with a long term competitive advantage.

So what are we saying here? 

Those of you who would seek to plan the next generation of PMO need to look to the six questions that Prahalad succinctly stated in his HBR column.  Finding that “NEXT PRACTICE” will become standard management practice if companies want to succeed.

Your comments are welcome.

While researching and writing this PMO blog, I have observed that, in the last several years, project-focused organizations have increasingly expanded the use of (or created) Program Management Offices within their organizations. 

Historically, the PMO concept first appeared in Information Technology or Information Services organizations, principally because those structures advocated and sponsored more disciplined and consistent/repeatable processes including change management, applications development, and project management processes.  From IT and IS organizations, the PMO then became more widespread in Shared Services organizations which served the larger corporate environment by handling common functions such as Procurement, Financial Services, Facilities Management, etc.  Next, the Enterprise Program Management Offices (EPMO) appeared to serve the entire business organization, or some major business/functional portion of a very large organization.

Most recently I have observed that:

1.  Both Home Depot and Lowe’s, two major Fortune 100 home building supply organizations, have formed IT PMOs.

2.  The Federal Reserve Bank of New York has expanded its IT organization to handle projects through a new IT PMO structure.

3.  Progress Energy, the electric utility serving portions of North Carolina and Florida, has recently introduced a Smart Grid Program Management Office (SG PMO) to handle all projects related to its Smart Grid business.

4.  Apple has introduced a PMO in its financial operations, reporting to the CFO.

5.  Cisco, ADP, Sirius/XM, Microsoft, Time Warner Cable, BP, and many many other major firms have employed variations of PMOs to serve portions of their businesses.

The list goes on and on.

It would be very easy to say that this proliferation of PMOs is simply due to organizations “maturing” to recognizing the “value” added by the PMO structure to the organization.  But, my background in science and engineering led me to search for the underlying issues and ask several knowledgeable people who have studied PMOs from within and without for years.

I spoke with Rich Maltzman (who writes a great blog about project management entitled “Scope Crepe” and who also works in a PMO of a major telecom company) and asked him about his impressions of PMO proliferation.  Likewise, I asked Wayne Thompson (author of the well known Project Management War Stories blog) for input on this subject.  Over the last several years, Wayne has interviewed a number of successful PMO managers for a series of podcasts about the functioning of their PMOs in small to large corporate settings. 

Rich Maltzman said:  “From my Scope Crepe and consulting work, I see that PMOs have long been the bastion–not only of IT–but also of enterprise-level project organizations.  I think, in fact, there’s a danger in not trying to build a community that goes beyond the IT or customer-facing PMs in an enterprise.  The overriding PM discipline and the community of PMs in an enterprise should be respected as a community and there should – even MUST – be sharing between the IT PMs and those who run the enterprises’ projects with customers (i.e. deploying a network, introducing a new pharma product).  So, a PMO at the enterprise level has value in that it builds a strong sense of community for PMs, honors the discipline, shares artifacts, and allows for the career growth of project managers – including job paths that may intertwine between IT and other enterprise functions.”

Wayne Thompson remarked:  “PMOs originated in IT and since IT was traditionally looked upon as a ‘cost center,’ the same view of that role carried over to the IT PMO.  But clearly, moving to the enterprise level with the PMO, organizations have recognized that the real takeaway in employing a PMO at that level is that it clearly adds value (rather than merely incur cost) to the enterprise’s strategies and should be evaluated as such.  Enterprise PMOs deliver concrete results in a disciplined manner.  In my blog work, I have found that PMOs have been deployed for any number of reasons depending on the business and industry context for that company.   And their scope is still expanding.”

This same reasoning applies to organizations just entering the project management discipline area as well.  A recent article “Dechert Puts Every Project Manager Through Project Management Training” (from The Legal Intelligencer) outlined the fact that law firms are now embracing project management as well.  Traditionally, many law firms felt that they were different, and that the work they did was somewhat unique and could not be managed using a discipline such as project management.  Pamela Woldow, a lawyer with the legal management consultant firm, Altman Weil, gathered feedback from general counsels and in-house counsels that they wanted their law firms to operate more like businesses and deliver their services more efficiently and cost effectively.  Consequently, Pamela has been developing and delivering project management training to partners as well as to associates. 

More and more law firms are seeking training in basic project management principles, and Pamela believes this trend will continue as legal firms seek to satisfy the needs of their clients. 

Once again, ”value addition” from a consistent, repeatable process is the key–just as it has been in the ramp-up of PMO structures in major project-focused firms.

So what does this all mean?

In William Bridges’ ground breaking 1994 book Job Shift:  How to Prosper in a Workplace Without Jobs, in which he summarizes the evolution and transition taking place in the traditional notions of work, jobs, and careers, Bridges states that:

“The single organization pattern that is free from this built-in bias (toward maintaining the status quo in organizations) is the project cluster.  Project oriented structures offer the important advantages of tailor-made design to fit unique tasks, flexible resource commitments, defined termination points, and an absence of enduring commitment that encourages a resistance to innovation.”

In the years since this statement was made, I believe that these “project clusters” have taken on the new structure of PMOs, and that PMOs have been deployed in organizations wherever a “cluster” of projects has been the norm.  The expectation is that PMOs will add lasting and strategic value to the organization. 

We are going to see more and more specialized PMOs in organizational settings as time goes on.

I would welcome some comments on these observations as well as supporting or alternative reasoning for the sudden proliferation of PMO structures in organizations.  Your comments are welcome.

Do you remember how Rod Serling started the “Twilight Zone” TV series each week?   He would say “For Your Consideration.”  That is exactly what I request of you in this blog entry.

An article entitled  ”Case Study:  Design in Cost Reduction“, which was cited in one of the Group Discussions on LinkedIn, caught my eye the other day.  The article’s author discussed how Motorola University (MU) was working with engineers, designers, marketers, supply chain stakeholders and clients, in what they termed Design for Manufacture and Assembly (DFMA).  

Basically, Motorola University draws on the “Cause” and “Effect” principle that fewer parts in a design will lead to less material and less labor cost in the finished product.  A colloborated and integrated effort in the Design Process, followed by a Manufacturing Process which closely follows the Design, will result in lower product cost and lower overall manufacturing cost. 

The article cited an example in which a top electronic device manufacturer used the Design for Manufacture and Assembly (DFMA) process, enabling it to complete 12 product redesign projects over a four month period, resulting in savings of $6.8 million.

The key for us, as project managers, is to recognize that the same principles can be applied in project planning and execution. 

A Design for Project Execution and Delivery (DFPED) could be developed whereby the “Cause” and “Effect” principle might read: 

Lower project cost, with increased quality of final deliverables, can be achieved by collaborated and integrated project planning and execution, which includes the project team, key designers, marketers, end user stakeholders and process/project engineers.

This is very similar to having a Balanced Scorecard concept for projects.  If you design the underlying organizational and human resource performance processes correctly, this will lead to improved overall project processes which will, in turn, lead to better customer satisfaction with the process and the deliverables, and which will ultimately lead to the project’s financial success.

Many of you will say “Yes, but.  It takes a very mature project management process and organization to fully collaborate and integrate these teams and processes such that they may fully realize this cause and effect result in the final project delivery.” 

While that may be the case, every project organization has the capability and the desire to do a better job than they are doing today in delivering projects and value to their organizations.  That desire should be enough to motivate the project organization to start an evaluation of their own Design for Manufacturing and Assembly process or, as I have defined it here,a  DFPED process.

I would like to hear some comments from some project organizations who have undertaken such process improvement initiatives, and may have even applied the DFMA framework.  Please comment if you have done so and let us know the results of such initiative.

In Session I, we talked about the PMO Author taking a clean sheet of paper and developing a Funding Authorization Statement or Summary for a project which would include information and details concerning supporting documentation for the justification and approval process. 

Here is the example we used:

“This funding authorization seeks $37.5 million (capital and expense) from the IT Executive Board to deliver the IT Marketing Apps Development Project for new Stores by December 2011. The Business Case is defined as follows…..The economics and payback are defined as follows….The risks to the project completion are defined as follows…..The proposed project team will consist of the following from IT and/or functional business units. The external consultants proposed for this project are ………Authorization of this project is part of a larger portfolio of projects which have been addressed by the IT Executive Board in its meeting of August 21, 2009.”

Every one of the Bolded Words (Information) in this Authorization statement need to be addressed including the following:

1.  Definition of the Bolded Word (Information).

2.  Location of the Bolded Word (Information), i.e. inside the PMO, supporting Corporate group, functional business group.  This detail will provide the PMO Author with decision points for various pieces of information. 

For example, the Business Case will contain financial/economic analyses which will need to be developed by someone or some group.  Wherever that someone or some group resides sets up a decision point for the PMO Author.

3.  At this point, I recommend that the PMO Author actually draw lines from the Bolded Word (Information) named in the Authorization Statement to a white space in the margin where the PMO Author will begin to fill in the details of what, where, when and how for each piece of information.

4.  It is important that every Bolded Word (Information) in the Authorization Statement be addressed by the PMO Author at this point so that the next stage of maturation in the process will flow smoothly.  Those of you familiar with David Allen’s Getting Things Done will recognize this as the next action.

5.  Once all the information and locations are defined for one project’s Authorization Statement, then additional Authorization Statements can be added for additional projects until a Portfolio of Projects is included.  At this point, an Information piece needs to be added to describe how the Portfolio will be handled.

6.  Obviously each Bolded Word (Information) will include human resource as well as physical and financial resource materials so that a Budget of human resources and physical and financial resources can be developed.

7.  Timing will also be a consideration after all Bolded Words (Information) and Resources have been defined.  Now the “process” is beginning to look like a  “Funding Authorization Process” and a flow of information to support the “Process.”

In the next Session, we will look at some other considerations such as ancillary or support processes for Control and Reporting.

You might want to revisit Session I again now that you have read Session II so that you get a complete picture of the “Process” and its inputs.  As we develop more detail and more information, we are beginning to define what is termed a “Well Define Process” which includes entry and exit information and flow as well as criteria for moving the process from one stage to the next in a controlled fashion.

Suppose you are a member of a successful IT or other business functional group whose members have successfully delivered “value” to their larger organizations/corporations through successful project implementation. Inevitably, this success brings additional requirements from the corporation to deliver more “value” through more projects over time. You begin to feel the pressure because resources may not be readily available or accessible in the timeframe you are asked to deliver, teams may not be prepared and, in general, although you saw it coming, your best efforts just to deliver the last increment of “value” was enough to keep you occupied.

So what’s a body to do?

This is exactly what faces every organization who decides to ramp up to a Program Management Office (PMO). But the question remains “how do I define just what I need in the timeframe I have been given to be successful?”

My answer which I have leveraged in several situations before is to take a blank sheet of paper and write a “funding authorization statement” for a single project just as if you were seeking funding today.

An example:

“This funding authorization seeks $37.5 million (capital and expense) from the IT Executive Board to deliver the IT Marketing Apps Development Project for new Stores by December 2011. The Business Case is defined as follows…..The economics and payback are defined as follows….The risks to the project completion are defined as follows…..The proposed project team will consist of the following from IT and/or functional business units. The external consultants proposed for this project are ………Authorization of this project is part of a larger portfolio of projects which have been addressed by the IT Executive Board in its meeting of August 21, 2009.”

Now, such a simple statement defines many things. It defines what project, what funding group, what business case, what risks, etc.

Every one of these details must be provided by resources which reside in the PMO or functional business units interfacing with the PMO.

When the PMO has a number of these Authorization Statments, it can begin to decide if a Methodology of handliing the Portfolio of projects and the LifeCycle of the Project Management Process needs revamping to facilitate consistency in the way all the projects are evaluated and authorized.

What does your “clean sheet of paper” look like? Have you given it some thought lately? If you are an organization looking to move to that next level of superior project service and “value addition” to your Corporation, think about that “blank sheet of paper.” Your business context will determine what elements need a place in the PMO and what must come from the business functional areas and perhaps even what must come from external stakeholders.