Advanced Project Portfolio Management and the PMO: Multiplying ROI at Warp Speed / Edition 1

by Gerry Kendall, Steven Rollins

Overview

Official reference material for the Portfolio Management Professional (PfMP) Credential Examination! This comprehensive book presents a road map for the achievement of high value enterprise strategies and superior project management results. It provides methods for best project selection, faster completion, optimal project portfolio management, and how to explicitly measure the PMO for rapidly increasing project ROI. The Project/Program Management Office (PMO) is the fastest growing concept in project management today and is key to effective implementation of project management across the organization. To keep pace with customer expectations, competition, and economic conditions in the fast-paced global economy, organizations must do more using fewer resources. Advanced Project Portfolio Management and the PMO shows you how to turn your PMO into a value machine.

Product Details

ISBN-13:	9781932159028
Publisher:	Ross, J. Publishing, Incorporated
Publication date:	04/01/2003
Edition description:	New Edition
Pages:	448
Product dimensions:	6.00(w) x 9.00(h) x 1.10(d)

About the Author

Gerald I. Kendall, PMP, has over 30 years of related experience and is President of MarketKey, Inc., a consulting firm that specializes in the fields of project management and constraints management (TOC). He is a noted author, management consultant, public speaker, and training expert and an active member of PMI.Steven C. Rollins, MBA, PMP, a well-known leading expert in Enterprise Program/Project Management Office, is co-founder of the PMOUSA Network. Steve recently led the deployment of www.pmousa.com, which was launched as a free information source to PMOs in the United States. Plans are in the works to expand this important service worldwide. Mr. Rollins is the Executive Chair for the Mid America PMO Regional Group that operates as a chapter of the PMI PMO Specific Industry Group. As the former Knowledge Vice-Chair for the PMI Metrics SIG, Steve was responsible for leading the framework development and rollout of the first ever comprehensive project management metrics Knowledge Center in 2002. This leading expert is also a featured speaker to many organizations.

Read an Excerpt

CHAPTER 1

INTRODUCTION — BUILDING A PMO THAT EXECUTIVES EMBRACE

INTRODUCTION

In its ideal form, the Project Management Office (PMO) should represent, for an organization, what air traffic controllers represent to pilots. It should guide projects safely (minimizing the risk) and as quickly as possible to their destination. It should prevent mid-air collisions between projects and resources. It should be the project manager's and the executive's best friend.

In our view, the PMO must do even more. It must drive much higher return on the investment that any organization makes in projects. In this sense, it becomes a value machine. To do so, the PMO must be the arm of senior management. It must help the executives meet their strategic goals by providing them with a single point of knowledge for project management intellectual property, among other things. The PMO must help executives execute.

To date, most of the PMO directors with whom we have spoken describe a very different model of their PMO. In a meeting with over 100 PMO directors in Kansas City in 2002, over 90% told us that they have no direct involvement with or expectations from their executives. They also told us to stop preaching to the converted. They know they need executive involvement and support. This book is intended to help.

Most executives would not agree that a PMO is even necessary, unless they fully understand the problems that project and program managers face today. So that is where this book begins.

There are many detailed questions you might have about a PMO. For example, what are the different options for organization structures? Is there a road map that we can follow to successfully implement a PMO? What portfolios of information must a PMO maintain, and what data are included in each portfolio? How do you measure a PMO? What software products are available to support a PMO and how do they compare?

We have included chapters to answer all of these questions and many more. Before exploring the details of the PMO and portfolio management solution, we would like to come to an agreement on what the current problems are in project management common practices. Then the formal definition of the PMO charter, its mission, and deliverables will become much more meaningful.

CURRENT PRACTICES IN PROJECT MANAGEMENT

Some of the practices we see in project management are nothing less than bizarre. By analogy, it is like doctors scheduling surgery in a hospital, regardless of whether or not the operating room is available. Imagine having 10 doctors show up on the same morning, all with prepped patients. No one person "owns" the operating room schedule. The operating room support staff report to different supervisors.

The supervisor decides that she doesn't want to have any surgeon be mad at her, so she instructs the operating room staff to multitask in order to assist all surgeons in the operating room. All surgeons will have access to the precious resource, the operating room table, and the one anesthesiologist and the one surgical assistant, but only for 15 minutes at a time.

Surgeon #1 begins surgery, but must relinquish the table to Surgeon #2 after 15 minutes. Surgeon #2 must relinquish to Surgeon #3 after 15 minutes, etc. Surgeon #1, who could perform his surgery in 1 hour dedicated time, is now stuck for 10 to 15 hours, trying to keep the patient stable. Each time a surgeon is given the precious resource, the operating room table, he struggles to remember how far along he had gotten in his last 15-minute slot, several hours earlier. Fifty percent of the 15-minute time slot is wasted just in getting restarted.

If this already sounds ridiculous, good! We are just scratching the surface of how projects are actually managed in organizations today.

The surgeons cannot afford to waste their time. They are a precious resource. So, in between their 15-minute time slots, they rush out of the operating room to do other important tasks. Sometimes, they become so preoccupied with another task, they do not even make it back to the operating room in time and miss their surgical slot completely. The surgery takes even longer. The surgeons also waste half their time going to and from the operating room, switching tasks.

Senior management of the hospital comes under pressure. They paid a lot of money to build the hospital. The operating rooms are the most precious resource of the hospital. The flow of patients through the hospital, and through the operating rooms, determines how much money will flow through the hospital. And the flow of patients is dreadfully short of what is needed to keep the hospital afloat.

The hospital is being squeezed by insurance companies, HMOs, etc. who are all demanding to pay less money for the same procedure. Senior management cannot hire more surgeons and cannot build more operating rooms.

Reports to senior management make everything seem wonderful, when, in fact, the financial situation is getting worse and worse. The hospital sets up a Surgery Management Office (SMO), to gather information and help patient flow. The first thing the SMO does is demand that everyone fills out detailed time sheets to help ensure full utilization of all resources. Various reports claim that the operating rooms and the surgeons are almost 100% utilized. Yet the revenue flow is decreasing. How can this be? While it is true that the operating rooms are heavily utilized on paper, the truth is that half of the utilization is bad multitasking, moving patients on and off the operating room tables. This activity generates no revenue. The SMO reports are not helpful in pointing out this flaw.

To increase revenues, senior management instructs the surgeons to initiate more surgeries per month. Their false belief is that if they initiate more surgeries, they will complete more surgeries. Another false belief is that if all resources are busy doing important work, then the organization's goals will be met.

Faithfully, the surgeons obey and the following month the picture is worse. Fewer surgeries are completed. Rework is increasing. Scrap (a bad word in a hospital) is increasing. The surgeons are complaining constantly that they are having fights with each other over the allocation of the operating room.

Senior management listens but would really like their staff to solve these problems themselves. Aren't they adults? Can't they get along with each other? Why do we, senior management, have to constantly be the referees?

The pressure increases and the executives declare that cost is too high. Procedures are taking too long. Surgeons are allocating too much time to each procedure. Supporting resource time is too high. Much of the focus is on cost and cost reduction. Schedules and budgets are cut across the board.

The following month, the executives are extremely unhappy, but are having great frustration in deciding what action to take. The surgeons did drive down the average cost and time per procedure. There was an average 1.5% cost reduction and a 3% time reduction per procedure. Yet the total operating expenses of the hospital did not change one penny. No surgeons or staff quit or were fired. The depreciation expenses of the hospital did not change. The revenues of the hospital did not get any better. In fact, they decreased.

The surgeons used the distortions of cost accounting to make the reports look favorable. Even though the time allocated by surgeons on their time sheets to the actual surgery was decreased, the hospital is still paying them the same salary. So the hospital expenses did not change.

The hospital is now in a crisis. Senior management decides they must take control of the details. They jump in and refocus the SMO to help prioritize surgical schedules, so that the most lucrative surgeries have access to the precious resource — the operating room table — for a full two hours at a time. Finally, some surgical procedures are flowing nicely to completion. The cash flow crunch is over. Senior management breathes a sigh of relief and moves on to "more important tasks." Within a few weeks, the situation has deteriorated again, and senior management must intervene.

The refocusing of the SMO helped to alleviate the symptoms of the problem, but did not get rid of the disease, the root problem. Without executive support and new SMO procedures, the surgeons' behavior reverts back to scheduling surgeries, regardless of the capacity of the system to handle it.

THE CURRENT PARADIGM

We claim that in most organizations, projects are managed this way. New projects are initiated by functional executives, irrespective of the resources available to perform the projects. Senior executives do this because they feel they have no choice. Their project is vital to their success, and, in some cases, to their survival. The project must be initiated. What better time is there to initiate it than right now?

Projects are initiated without collaboration and coordination between functional executives. Where an organization, realistically, has the shared resources to focus on a few initiatives and get them accomplished quickly, we find most organizations focused on dozens of initiatives.

Resources are multitasked between projects in order to please all functional executives. Resource managers also feel that they have no choice. Who are they to tell someone several levels more senior to them that they simply do not have the resources available? The resource managers feel obligated to show progress to executives and customers on all projects.

There is far more time spent on reviewing project budgets and focusing on cost aspects of projects than there is on decreasing the cycle time of a project. We claim that this is incorrect. A project is created to bring benefit to an organization. The benefit may come from increasing or creating new revenues (new products or services), by decreasing some existing operating expenses, or by decreasing or improving return on some investment. No matter which of these is true, the benefit is not realized at all until some major milestone of the project or the entire project is complete. The faster the project is completed, the sooner the company realizes the benefit. In many cases, if the project takes too long to implement, there are no benefits (e.g., new product introduction). The competition has already taken the market.

In many projects we have examined, using resources inefficiently to complete the project earlier would have delivered more benefit than a focus on efficiency or project budget would deliver. This is particularly true where the revenue or investment benefits that the project brings to the organization are more significant than the project budget.

Project managers and executives are frequently in conflict over deadlines and resources. Project managers and resource managers are frequently in conflict over resources (which ones to allocate to which projects, how many, when they can start a task). Project managers are also frequently fighting with other project managers over resources. In a matrix organization, with these types of conflicts, it is easy for managers to make resource allocations that are different than the ones the CEO would make.

No wonder executives are so frustrated with how long it takes to implement a new strategy. No wonder executives are frequently intervening and playing referee, much to their frustration. No wonder project managers are frustrated with executives.

THE PROJECT MANAGEMENT OFFICE INITIATIVE

In our combined 60+ years of experience, we see the current explosion of PMOs as a very significant event, considering project management history of the past 35 years. CIOs, executives, and project and program managers are all looking for better results and a way out of their current problems. Finally, many more organizations are recognizing the need for a more centralized approach.

Briefly, a PMO is a centralized organization dedicated to improving the practice and results of project management. Some PMO initiatives are minimal, involving part-time staff to help out on projects as needed. Other initiatives involve huge infrastructure, with rigid centralized planning, control and methodology.

Are the executives ecstatic about this development? No! In fact, our clients and our survey results indicate that there is huge resistance to implementing a PMO and difficulty in maintaining it once it is implemented. Further, many PMOs are not driving breakthroughs (15%+ improvement) in project management results. If they are driving any improvement, it is 1 or 2% on paper. Many PMOs are not even measuring their effect in a way that is meaningful to senior executives.

Most executives we know are very wary about any suggestion that involves an increase in corporate overhead. Executives have ample experience showing that the cost side of any proposition always comes true, while the benefits often do not. At a time when operating "lean" is part of every executive's strategy to keep costs under control, the idea of implementing a PMO is not easy to sell.

We are also witness to many PMOs that initially attract executives with the words "more control." Executives believe that many projects are out of control — in terms of time, budget, scope or all of the above. They are correct, but often attribute these symptoms to the wrong root problem. They believe that there is not enough pressure or centralized control over projects. So when an advocate for a PMO comes to senior management and offers "strict control," the executives' ears perk up.

Unfortunately, all too often "strict control" translates to unacceptable bureaucracy, longer project duration times, resistance and fighting among project managers who believe their independence and creativity are diminished. We believe strongly that the correct answer does not lie in "strict control."

Executives tell us that they are tired of suggestions based on overused buzzwords — improved productivity, better customer satisfaction, improved skills and even improved "quality." Executives need more profits, more stakeholder value, better cash flow, easier ability to get funding, and greater competitiveness. Even if these words are part of a PMO proposal, executives need more. They must see the road map — how the PMO will deliver on these promises.

CHARACTERISTICS OF A PMO THAT EXECUTIVES WILL EMBRACE

Simply put, executives will perceive value if the PMO helps the executives meet the goals on which they are measured. In order to build a PMO that executives will fully embrace, we claim that it must have the following characteristics:

* It must drive more projects through completion, without correspondingly increasing resources (e.g., 50% more projects).

* Most projects must be completed in drastically shorter times (e.g., 25% reduction in average cycle times).

* The impact of the PMO must be clearly felt on both the top and bottom lines of the organization (even in not-for-profit organizations).

* Executives and managers throughout the organization must feel that they are getting benefit out of the PMO (i.e., they must see what is in it for them).

We are describing results (i.e., 25 to 50% improvement) that imply a significant breakthrough in the practice of project management throughout the organization. To achieve such a breakthrough in results, the ideas presented in this book must make you skeptical or excited or, at least, uncomfortable. Otherwise, they are probably not breakthrough ideas. At the same time, the ideas must not defy common sense. Many radical ideas do not result in improvement for the organization.

Our approach to achieving such a breakthrough is a holistic approach. By holistic approach, we mean that we look at the entire collection of an organization's projects (the project mix) and how it is linked to achieving the goals of the entire organization, not just one functional area. A PMO must be able to help executives with execution of strategy, as determined by the project mix and flow, or the PMO will not achieve sufficient level of value to sustain itself.

The holistic approach raises the question, "Should all project managers report to the PMO?" Our answer is, not necessarily. To work effectively, there needs to be a strong matrix relationship between the PMO and all project managers. We have seen many examples of effective PMOs without the direct reporting relationship. Results are generally better, longer lasting and happen more quickly when project managers buy in to the goals and efforts of the PMO, rather than being forced into it.

To achieve an organization's goals, the organization must have the correct project mix. This means that the projects must balance the needs of the market (the market side) with the need for sufficient internal capability of the organization to supply the market (the supply side). Most organizations we work with have an imbalance — a leaning toward the supply side and weak or insufficient projects addressing the market side.

(Continues…)

---

Excerpted from "Advanced Project Portfolio Management and the PMO"
by .
Copyright © 2003 International Institute for Learning, Inc. and J. Ross Publishing, Inc..
Excerpted by permission of J. Ross Publishing, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

---

Table of Contents

Part I: Setting the Stage for a Successful PMO Implementation,
Chapter 1 Introduction — Building a PMO That Executives Embrace,
Chapter 2 The Right People, the Right Tools, the Right Data, the Wrong Result — Why Pmo Implementations Fail,
Chapter 3 What Is a PMO and What Should a High Value PMO Do?,
Chapter 4 Moving Project Management from the Cost Model to the Throughput Model,
Part II: Strategic Planning — Choosing the Right Project Mix,
Chapter 5 Strategic Planning — The Number One Reason for Project Manager Stress,
Chapter 6 Applying Deming, Goldratt, and Six Sigma to Systems Thinking,
Chapter 7 The Eight Major Subsystems that Strategic Planning and Project Management Must Address,
Chapter 8 The 4 × 4 Approach to Strategic Planning,
Chapter 9 The Right Marketing Projects,
Chapter 10 Securing the Future — The 10-Year Advantage Via Theory of Constraints,
Part III: The PMO in Detail,
Chapter 11 The Governance Board and Prioritization Management,
Chapter 12 Linking Project Progress to Strategic Objectives — The Executive Radar Screen,
Chapter 13 Delivery Management and Acceleration,
Chapter 14 Project Portfolio Management,
Chapter 15 Resource Portfolio Management,
Chapter 16 Asset Portfolio Management,
Chapter 17 Managing the Multi-Project Environment — The Critical Chain Approach,
Chapter 18 Reducing Negative Human Behavior,
Chapter 19 PMO Organization Models,
Chapter 20 PMO Roles and Responsibilities,
Chapter 21 Inputs and Outputs to a PMO,
Chapter 22 PMO Measurement System,
Chapter 23 EPM Tools and Their Value on Project Delivery,
Chapter 24 PMO, PMI, and the PMBOK,
Part IV: Implementing a PMO,
Chapter 25 The Executive Proposal in Detail,
Chapter 26 Obtaining Executive Buy-In,
Chapter 27 The PMO Value Proposition Maturity Model — Where Is Your PMO?,
Chapter 28 The Road Map to Implementing a PMO Executives Will Embrace,
Chapter 29 Sustaining the PMO Value — Moving from the Supply Side to the Market Side,
Chapter 30 Conclusions,
Appendix A The PMO Maturity Model,
Bibliography,