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Turning Work Into Measurable Results.

"Our strategic plan calls for growth through acquisition and more effective use of our ERP system," says the CEO of a midsize manufacturer. Yet, as he and his CFO acknowledge the need for improved corporate performance, the frustration level in the room is obvious. They are stuck in the midst of lost market share, increased costs of raw materials and labor and extensive fluctuations in distribution costs.

Everyone in the organization was singing the same tune: "We're working on it." Yet improvement in the month-to-month bottom line wasn't in sight. These executives needed a practical way to turn work into results. They needed a way to answer the question: "How can we tell what's going on?"

The "we're working on it" syndrome is not unique in today's corporate merger-mania economy. In many organizations, departmental functions are focused on solving more immediate problems, rather than long-term corporate issues. Their efforts lack integration at the enterprise level and frequently wander without specific objectives, then wind up costing more than they return.

A good example of "wandering" is the objective of producing a more effective forecast with improved accuracy. Sidetracking can easily take place if metrics have not been put into place to determine a measurable result or direction. If current effectiveness or accuracy is unknown, then it's not realistic to set goals such as "achieve a forecast in six weeks with 95 percent accuracy."

That's when the answer to "what's going on?" becomes a myriad of tactical, reactive operations rather than strategic, proactive improvements.

As the CEO and CFO describe their organizational strategy and management of the work efforts get underway, it's evident that the bot tom line is being held hostage by bloated project expenses and lagging lead times. These results are substantiated by industry statistics that indicate a 75 percent project failure rate due to disappointing results or abandoned projects, according to the Standish Group International, a research group. Stan dish also estimates the annual cost of these failures to corporate America at $80 billion to $145 billion.

With only seven available resources for every 10 requirements and an ever-climbing failure rate of projects, there's a critical need for determining the right projects to pursue with the right people.

Developing a PMO

That's when this manufacturer's CEO and CFO turned their attention to the benefits of developing a project management office (PMO) to pro vide at least two specific actions: portfolio management with project initiation, and project management methodology for controlling the portfolio of projects. According to the Meta Group, a technology research firm, the costing, tracking, and change documentation of a PMO can reduce project failures by as much as 80 percent.

Think of a portfolio as a filing cabinet. For example, the information systems department has a cabinet full of applications. For a business unit, the portfolio is full of information about each business function (forecasting, marketing, selling, customer service, etc.). To more effectively manage projects within the filing cabinet, it's essential to categorize these applications or business functions in order to analyze and initiate the correct projects for improvement.

To control this portfolio, project management methodology works together with a proven life-cycle methodology for efficient project delivery. This combination provides the most efficient way to manage projects and avoid administrative layers from overburdening people or the workflow. The portfolio management and methodology provide the parameters of a project -- the who, what, when, why and how -- for achieving success. The result of this PMO strategy: on-time, on-budget performance based on business metrics. (See diagram: Project Management Office.)

There is never a wrong time to start a PMO. However, the right time is not only when there are too many projects to manage, but more importantly, when business improvement mandates a consistent guide to project completion. While organizations develop strategic business plans and corresponding information technology (IT) strategies, rarely is "strategic implementation" a part of the picture. That's the job of the PMO.

A properly aligned PMO transforms the strategic business and IT plans into projects with business drivers, approved technologies and financial objectives. By also providing project management best practices, it can deliver those projects more efficiently and effectively. With an objective of better business return and lower operating expenses, executives can create and follow a roadmap for establishing a PMO.

Finding the driver

Who drives a PMO and where is the organization going? Early success factors that go hand-in-hand are executive sponsorship and alignment of business objectives. If the PMO is guiding the entire enterprise, as in an acquisition strategy, that means direct CEO involvement. If it's supporting a supply chain or information systems initiative, then align the PMO to the head of that specific part of the organization. In addition, it's important to align business objectives with the PMO in order to establish an appropriate reporting structure with ultimate accountability.

For example, the goal of reducing the cost of doing business across the enterprise may bring in representatives from finance, operations, manufacturing and marketing who report to the CEO.

Another organizational alignment issue is choosing between centralized or decentralized project management. The former handpicks the best project managers scattered across the enterprise and brings them together within a PMO where their skills are the focus of project delivery. The latter trains operational managers throughout the organization in the project management discipline to utilize their unique business or operational knowledge. The decision should be based primarily on talent and experience, but also on culture.

Without executive sponsorship, an organization will likely face a major roadblock: lack of dedicated resources, business priority and focus. And without alignment of business executives, a PMO may wind up in the wrong department with an executive sponsor who cannot deliver.

Creating a roadmap

Just like gearing up for a cross-country trip, organizations need help to reach the destinations set by their strategic business and IT plans. The PMO works as a tour guide to manage the implementation of these plans and creates a separate roadmap to allow these plans to work together. By reviewing both the strategic and IT plans, business needs and functions can be prioritized and supported by the PMO.

Priorities for the PMO strategy may include business requirements or direction from the business or IT strategy. Examples of two PMO strategic scenarios:

* If the direction of the business strategy is reducing the cost of operations, the PMO may focus on specific areas of the portfolio -- such as purchasing of raw materials -- and build cost management and tracking practices as the key methodology.

* If the IT strategy is directing the company to purchase software packages, rather than spend time and resources to build customized applications, then the PMO may focus on procurement management.

Without matching business requirements or direction to PMO objectives, there is no way to reach the organization's business performance destination.

Implementing the PMO

The PMO's destination is efficient project delivery by translating these business requirements to PMO processes and functions. This takes a close examination of the best practices within the project management industry. There are five processes and nine knowledge areas defined by the Project Management Institute (PMI) as industry standards. They are available by going to PMI's Web site at, or working with an accredited consultant.

Without subject-matter expertise -- whether internal or external -- an organization will likely face another major roadblock: speed bumps that slow down PMO implementation. This includes not only project man agement skills but also specific knowledge areas based on business requirements, such as supply chain, e-commerce and inventory specialists.

Once the practices are identified for the PMO, they should be laid out along a timeline that supports business critical deliverables first. Think of it as an organizational chart where the project management processes and knowledge areas are scheduled within a three-to-five-year time frame according to deliverables. (See diagram: PMO Implementation Schedule.)

The best way to implement a PMO is to run it as a project. A dedicated PMO manager can establish a project plan that supports the PMO requirements and strategy. This individual can identify all the appropriate activities and determine who is responsible for each activity. Immediate activities should focus on implementing organizational alignments and leveraging current project management strengths.

It will be crucial to integrate any business-specific deadlines or deliverables into the PMO project schedule. In the case of an acquisition, if the target is third quarter of next year, then the practices must be aligned to ensure acquisition by that time period, with people who are trained and knowledgeable in the processes.

As the business and IT plans are readjusted, the PMO strategy will need to be updated with an eye towards continuous business improvement.

In summary, a PMO strategy became a practical way to turn work into results for the frustrated CEO and CFO who originally asked: "How can we tell what's going on?" A two-month project portfolio review revealed a series of tactical efforts without specific, measurable results. Over the next 20 days, those projects with merit were moved forward with project management methodology, milestones and deliverables. Four months later, the executives were happy to see that the first two projects were turning a profit.

Janet Wilson is a senior consultant for PRAGMATEK Consulting Group Ltd., an e-business and management consulting firm based in Minneapolis. Wilson has developed project management practices and offices for several Fortune 500 clients.
COPYRIGHT 2001 Financial Executives International
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Copyright 2001, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Wilson, Janet
Publication:Financial Executive
Date:Jun 1, 2001
Previous Article:The PERILS of Managing OVERSEAS.

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