I am frequently asked to quantify the value of improving an organisations project management capabilities or how to establish the ROI for a new PMO.
Whilst these questions are sensible they are nearly impossible to answer. Certainly there are strong indicators of the value generated by an effective PMO, this has been demonstrated repeatedly in studies by KPMG, PWC and others (Download the PMO studies).
OPM3 is more difficult. The most useful option is a comparison with CMMI. The larger user base for CMMI makes statistical analysis possible and demonstrates a consistent value proposition for improving organisational maturity and capability (see more on OPM3).
The question is can the generic data generated by these studies be translated to a specific proposal in a single organisation. Unfortunately the answer is no. On average an organisation can expect a significant return on monies invested in PMOs and improving project, program and portfolio management maturity but as risk practitioners know only to well, on average, nothing is average. Some situations will fail, other will generate stellar returns.
This is not a new problem. In June of 1962 the USA Dept. of Defense promulgated PERT/COST as a new general purpose management system for use on major military system acquisition programs. In 1964 a major study was undertaken by The Mitre Corporation to investigate the question of how to evaluate the design of the PERT/COST management system. This study still makes interesting reading today.
The overarching conclusions in the report were:
- That there is no single, simple straightforward way of deriving value judgments as to the PERT/COST system design, or probably any other general purpose management system.
- The interrelationships between a management system and the quality of its implementation operation (including the capability of the managers who use it), presents serious difficulties in the assessment of the value of the management system alone.
- The value of the system is intimately related to both the quality of its implementation and the capability and willingness of the appropriate managers to use it.
- An evolutionary approach is a good way to evolve the development of the system capability in an orderly fashion over period of time. It is ideal in cases where the ultimate capability to be required of the system cannot be precisely defined, but where the direction toward which increasing system capabilities should be oriented are predictable.
My post on Cobb’s Paradox asked the question why do executive managers allow poor quality systems to exist in their organisations. Possibly one answer is the difficulty of generating a simple investment proposition discussed in this post.
Better informed executives are capable of bypassing set minimum ROI values or payback periods, focusing instead on the demonstrated competitive advantage to be gained by selecting the right projects and programs to do, then doing them right! The challenge for project management professionals in other organisations is making the necessary information available in ways that can be received and understood by the executives.
In conclusion, Harry S Truman said “The only new thing in the world is the history you don’t know.” To help you avoid this problem, the 1964 Mitre Report, authored by R. L. Hamilton, can be downloaded from the link (Handle) on http://oai.dtic.mil–AD0603425
Posted in Governance, Stakeholder Management, Value
Tagged Benefits Realization, CMMI, Maturity Models, OPM3, OPM3 ProductSuite, Organizational Project Management Maturity Model, PERT, PERT/COST, PMO, PMOs, Project, Project Controls, Project Governance, Project Management, Project Management Maturity Models, Project Management Office, Project Management ROI, Project success, Stakeholder Management, Stakeholders, Value of Project Management
Cobb’s Paradox states, ‘We know why projects fail; we know how to prevent their failure – so why do they still fail?’ PMI has recently published its latest Pulse of the Profession survey which shows some improvements on the 2008 and 2006 results but not much. Nearly half the projects surveyed in 2010 still failed to meet time and cost targets.
However, the PMI survey did highlight a stark difference between high performing organisations with a better than 80% success rate, and low performing organisations with a greater than 40% fail rate. And, the survey also clearly showed the processes typically used by the high performing organisations (and ignored by low performing organisations) are straightforward to implement and use; they include:
- Using standardised project management processes.
- Establishing a process to mature project, program and portfolio management practices.
- Using a process to increase project management competency.
- Employing qualified project managers.
Most of these elements coalesce around an effective project management office (PMO). Simply by standardising project management processes, the survey shows an organisation can expect a 25% increase in project success.
None of this new is new, KPMG demonstrated exactly the same point in its 2002 and 2003 surveys, supported by similar findings by PwC in 2004 (see: http://www.mosaicprojects.com.au/Resources_Papers.html#Proj_Off).
What’s worrying me is the large number of organisations whose middle and senior management are simply failing their stakeholders by not implementing these simple pragmatic steps. The question that should be asked is WHY?
The stakeholders whose rights are being ignored include the owners who have a right to expect efficient use of resources entrusted to the organisation and the people employed on the failed projects whose work life is made unnecessarily stressful.
As Deeming pointed out in the 1950s, quality is a management responsibility. Therefore, allowing poor quality project management processes to exist in an organisation is a management failure. To quote another mantra: quality is designed in not inspected in. Workers and project managers cannot be expected to retrofit quality into defective systems; systemic failures are a failure of management.
What makes the situation even more worrying is that the tools to develop a quality project management system are readily available. Models such as CMMI, P3M3 and PMI’s OPM3 maturity model has been around for years and are regularly updated.
PMI has recently moved to improve the availability and support for its OPM3 Self-Assessment Module (SAM). This basic assessment system is now sold and supported by organisations such as Mosaic that are qualified to deliver the full range of OPM3 services and help businesses achieve the best return on their investment (for more see: http://www.mosaicprojects.com.au/OPM3.html). OGC have similar arrangements for P3M3 as does CMMI.
So, given the tools are available, the knowledge is available, and the value has been consistently demonstrated; why are organisations still prepared to squander $millions on failed projects rather than investing a fraction of that amount in simple systems that can significantly improve the value they deliver to their stakeholders?
I would be interested to know the answer.
Posted in Governance, Value
Tagged Benefits Realization, CMMI, Cobb’s Paradox, Deeming, KPMG, Maturity Models, OPM3, OPM3 ProductSuite, OPM3 SAM, Organizational Project Management Maturity Model, P3M3, PMI, PMI Accreditation, PMI Standards, PMO, Program Management, Project, Project Governance, Project Management, Project Management Maturity Models, Project Management Methodology, Project Management Office, Project Management ROI, Project success, Pulse of the Profession survey, Quality, Quality systems, Value Management, Value of Project Management
Mature organisations firstly select the right projects to do, then do them ‘right’. The pyramid of returns on effort demonstrates the power of investing time to ensure the right processes are in place to support the right people to do the right things.
Identifying, developing and using the right processes is a key factor in organisational maturity. Research by Carnegie Mellon University and the Software Quality Institute shows that organisations who improve their process maturity gain:
- improved schedule and budget predictability
- improved cycle time
- increased productivity
- improved quality (as measured by defects)
- increased customer satisfaction
- improved employee morale
- increased return on investment
- decreased cost of quality.
And the best way for an organisation to improve its process maturity, is to use a process maturity model. Three models seem to dominate, these are:
- CMMI from Software Engineering Institute (SEI): Carnegie Mellon University. CMMI (and predecessors) has been used by organisations for many years, there is statistical proof of effectiveness and two approaches to maturity assessment (staged and continuous). CMMI is a systems engineering maturity model with project management as one aspect of systems delivery.
- OPM3 from PMI: offers most comprehensive assessment and reporting, supported by software (OPM3 ProductSuite). OPM3 offers reports on a continuum of best practice by project, program and portfolio and by stages of improvement. OPM3 is a project, program and portfolio management model supported by hundreds of best practices. For more on OPM3 see: http://www.mosaicprojects.com.au/OPM3.html
- P3M3 from Office of Government Commerce UK (OGC): offers a staged approach that supports an organization’s journey through progressive maturity in all three domains. P3M3 is more aspirational in its approach, lacking some of the rigor and detail of the other two systems.
For a more in-depth discussion see: Modelling Your Maturity, P3M3, CMMI and/or OPM3
These basic processes closely align with my SRMM model for Stakeholder Relationship Management Maturity. For more on this see: http://www.stakeholdermapping.com/
Maturity modelling is an important step to attaining process maturity, the challeng is choosing the best model.
Posted in OPM3
Tagged Benefits Realization, CMMI, Maturity Models, OPM3, OPM3 ProductSuite, Organizational Project Management Maturity Model, P3M3, Project, Project Governance, Project Management, Project Management Maturity Models, Project success, SRMM, Stakeholder Management