Tag Archives: PMO

Project Zone Congress, Frankfurt #1

ProjectZoneCongress

The opening day of the Project Zone Congress  included a full day track focused on Project Portfolio Management.  The quality of the presentations made it one of the most interesting day’s I’ve spent in a very long time!

The presentations linked the critical importance of a strategic PMO to effective portfolio management and PPP governance.  The importance of ‘doing the right projects’ was highlighted by a presentation from SAP; 20% of the world’s business involves one organisation delivering a ‘project’ to another organisation, and then there is the increasing tendency for organisations to achieve growth and change by commissioning internal project.

The first key message from the day was the vital importance of each organisation developing a realistic and achievable ‘strategic road map’, with specific milestones, that define how the organisations strategy will be achieved.  Most organisations have a high level strategy, very few have a pragmatic plan for the next 1 to 2 years describing exactly what will be done towards achieving the overall strategy in that timeframe.  Developing this practical implementation plan (still at a reasonably high level) is difficult work for the executives involved.  However, once the plan is agreed it becomes the key tool for implementing effective portfolio management decision making to select the projects and programs that contribute most strategic value.  Building this capability is a key governance issue!

The next key message is that developing the ‘road map’ and then accepting portfolio investment decisions based on the ‘road map’ requires discipline and cannot occur without strong executive level support.  Manager’s ‘pet projects’ are always an issue!

One very useful idea was using the ‘road map’ and portfolio management to assess projects at the ‘idea’ stage – a standard one-page outline of the concept being proposed.  If the concept fits into the ‘road map’ and looks feasible it is approved for developing a business case and planning, if it does not, it is rejected before much investment of time and effort has occurred. A much easier decision!! The process needs to be disciplined but not ridged – a degree of flexibility is essential to allow effective responses to market changes and regulatory changes.

The concept of value was also discussed – projects need to be assessed on their contribution to achieving strategic objectives as well as financial factors. Value is far more than just dollars!!

Probably the strongest message for me was the importance of concise information in modifying behaviours.  An effective strategic PMO can have a huge effect on executive decision making simply by informing the executive of the ‘road map’ and of the effect any decision will have on the organisations overall journey towards its strategic objectives – good information really does lead to good decisions (and makes defending a ‘pet project’ very difficult – no one like to look too disruptive).

The importance of the routine aspects of portfolio management were not ignored (see more on portfolio management), understanding capability and capacity, the effect of queuing theory slowing everything down if too much work is approved  was discussed, and the importance of effective surveillance of projects in progress were all covered.  And my presentation on Portfolio governance and risk – its all about the stakeholders was well received

A key closing thought is do not underestimate the time and effort needed to change organisational culture to facilitate effective strategic planning at the ‘road map’ level linked to portfolio management and the creation of an effective strategic PMO.  Most presenters had  spent 3 to 5 years building the capability within their organisations and were still working on the executive ‘culture’ to achieve the outcomes they were describing.  The good news is that it is worth the effort; the SAP presentation quoted data showing an increase in profit of between 2% and 5% of the organisations turnover associated with implementing effective portfolio governance.

Strategic PMOs

Strategy1PMOs that focus on process, tools and report formats are out of step with the needs of executive management and unlikely to survive.

Value is created through the alignment of projects with the goals of the organisation and best-practice PMOs go beyond alignment with strategic initiatives; they are involved in creating and implementing organisational strategy.

The type of measurements that matter in this environment focus on measures such as ‘Return on investment (ROI)’, benefits realised, risk profiles and payback periods. Simplistic measures such as time and cost performance, use of processes, courses run and the number of qualifications achieved are not sufficient; and in themselves are largely irrelevant.

Processes and staff training are a means to an end, not an end in themselves! What matter is measures that demonstrate the qualified staff, applying the processes, are more effective at delivering valuable outcomes. Good processes improve efficiency and reduce error; bureaucratic processes reduce efficiency and drive up costs (see more on process improvement).

StrategyBut even that is not enough! These elements only look at doing projects ‘right’. Successful PMO leaders cite project alignment to strategic objectives as the top-rated PMO function that has the greatest potential for adding real business value to their organisational activities.

As part of PMI’s Thought Leadership Series, PMI in partnership with the Economist Intelligence Unit, Boston Consulting Group and Forrester Consulting, has examined the changing role of PMOs as they shift emphasis away from process and towards the more important role of contributing to value delivery. Their reports can be downloaded from: http://www.pmi.org/Knowledge-Center/PMO-Thought-Leadership.aspx

There’s a lot of reading in these reports – maybe a good use of any excess holiday time…..

For more of out thoughts on PMOs see: http://www.mosaicprojects.com.au/PM-Knowledge_Index.html#OrgGov4

Project Surveillance from an Expert!!!

Lisa-Wolf_webLast year at PMOZ 2012, I had the pleasure of listening to Lisa Wolf outlining the approach to project surveillance and health checks she has introduced and manages at one of the world’s foremost consultancy firms, Booz Allen Hamilton. Lisa’s presentation packed in more good advice than most people manage in a week!

This year Lisa is back in Australia at the PMI Australia Conference, Sydney Convention and Exhibition Centre: 1 – 3rd May 2013. Her Master Class on the 3rd May is a must attend for any PMO manager, Project Director or Project controls professional.

Lisa’s master class focuses on the approaches she has adopted and the lessons learned in setting up an internal project management surveillance function within Booz Allen Hamilton’s as well as her extensive experience assisting US Government agencies and other clients.

The term surveillance is derived from the French word ‘surveiller’ and has a military pedigree. It refers to keeping watch on a location or person. In the case of project management, the notion of surveillance begs the question, “What do you watch?” Observing a project manager first hand is unnecessarily overbearing and may not be warranted. What you can watch is a project manager’s outputs from baseline establishment through project execution, as well as the people, processes, and tools in place to ensure appropriate monitoring and control processes are effective.

During the workshop, Lisa will explore the ‘best practices’ that are essential for successfully establishing a helpful and supportive surveillance function, including the essential processes, procedures, and vital internal relationship-building will be explored. She has proved effective and helpful surveillance will improve project performance – you too can learn the secrets!

For more information see: http://www.pmi.org.au/masterclass/.

I’m certainly looking forward to catching up with Lisa in Sydney where I’m presenting our paper Communication ≠ Engagement on the 1st day.

I encourage you to take advantage of this unique opportunity to learn from a ‘master’ and look forward to seeing you in Sydney.

Managing risk

One of the most overlooked processes for effectively managing the day-to-day uncertainty that is the reality for every single project, everywhere, all of the time, is an effective performance surveillance process. This involves more than simply reporting progress on a weekly or monthly basis.

An effective surveillance system includes regular in-depth reviews by an independent team focused on supporting and helping the project team identify and resolve emerging problems. Our latest White Paper, Proactive Project Surveillance defines this valuable concept that is central to providing effective assurance to the organisation’s key stakeholders in management, the executive and the governance bodies that the project’s likely outcomes are optimised to the needs of the organisation.

PDC Value Proposition

The only reason for undertaking a project or program is to create value through the realisation of benefits. Some projects generate significant intangible benefits such as reduced risk, enhanced prestige or in the case of regulatory requirements, the simple ability to keep trading; others are focused on generating a positive financial return, most generate a combination of financial and intangible returns.

A key element in Project Delivery Capability (PDC) is understanding the value proposition the project or program has been created to generate. Regardless of the way the ‘return’ is measured, no project should destroy value, unfortunately as discussed in Disappearing into the Zone far too many do!

The value proposition for developing an effective PDC (itself a business change program) is compelling. World-wide research undertaken by Jed Simms at the Boston Consulting Group in the 1990s defined five levels of PDC, and found that the return on investment (ROI) from projects increased substantially at each level*. These findings have been developed into a project delivery capability model by TOP – Totally Optimized Projects Pty Ltd

  • Level 1 capability is represented by executive complacency, project teams doing their own thing, no benefits management, and on average projects typically show a small negative ROI but results are wildly variable with some successes (which are always highlighted).
     
  • Level 2 capability sees the imposition of process focused on measuring activity rather than outcomes. The business imposes forms, requirements and check lists; ‘methodology police’ enforce a one-size-fits-all policy. The process of developing ‘approvable’ businesses cases and standardised project reporting creates more uniform outcomes but there’s little understanding of risk -v- reward and virtually no follow through to implementation and benefits realisation. As a consequence there is typically a neutral ROI – the value created eventually covers the costs despite the glowing promises in the business case.
     
  • Level 3 capability sees the organisation gaining sufficient experience and confidence to allow measured flexibility into its processes for managing projects. The basic disciplines are retained, but the way they are implemented is adjusted to suit the needs of the project. The executive view moves from imposing ‘controls’ towards an outcome focus using elements of portfolio management. However, project success still tends to be measured in terms of time, cost and scope at the end of the project rather than the benefits gained by the organisation; an output focus rather than an outcome focus. Organisations at this level generate a reasonable ROI measured at the project level but largely miss the potential for substantially enhanced business outcomes.
     
  • Level 4 capability introduces a paradigm shift in executive thinking. Rather than focusing on project outputs, the work of the project is seen as a key enabler of valuable business outcomes. This requires an integrated flow from the identification of a need or opportunity within the business through to implementing the changes required to deliver of the expected business outcomes to meet the need or exploit the opportunity. Ownership of this value chain is vested in the business, the role of projects and project management is to support this overall effort by delivering the outputs best suited to achieving the business objective. The model defined in PDC = Project Delivery Capability represents the PDC framework needed to support this level. Simms’ research suggests there is an increase in ROI to 2 to 3 times that achieved at Level 3 once the focus of organisation’s executives shift to achieving business related outcomes, measuring the benefits actually realised and the value achieved.
     
  • Level 5 capability expands on Level 4 with the whole PDC system focused on efficiently supporting the strategic objectives of the business. Effective strategic alignment linked to pragmatic risk management and simple but effective processes generates another significant increase in ROI!

Based on observation rather then measurement, it seems the majority of organisations in both the public and private sectors are currently operating at Level 2, typically with the PMO fulfilling the role of ‘methodology policeman’, a few more mature organisations, mainly private sector, are achieving Level 3 maturity whilst others remain at Level 1.

Very few have taken the step to Level 4 where the executive hold their business managers accountable for achieving the outcomes defined in the business case and invest in the PDC capability required to properly support their business managers.

Doing projects ‘right’ is a Level 2 phenomena, doing the ‘right projects, right’ is Level 3; the optimum is Levels 4 and 5 where the right projects are done for the right strategic reasons. PDC was forecast by Simms as the next competitive battleground in 2005 – I would suggest it is the competitive battleground in 2012!

* Source, Project Delivery Capability – the next competitive battleground, Jed Simms, TOP – Totally Optimized Projects Pty Ltd.

Project Governance

Corporate governance is defined as aligning as nearly as possible the interests of individuals, the organisation and society. Good governance is good business!

Project governance is a sub-set of corporate governance, focused on systems that ensure the right projects and programs are selected by the organisation, and the selected ‘few’ are accomplished as efficiently as possible. Projects that no longer contribute value to an organisation should be terminated in a way that conserves the maximum value and the resources reallocated through the portfolio management process to more valuable endeavours.

Project Governance Structure

The framework for effective project governance is laid out above, and is an executive management responsibility. Sponsors and the Portfolio Selection/Management processes provide the key link between the executive and the working project and programs (for more see our Governance White Paper).

The focus of this post is to look at the pre-selection activities that inform the portfolio selection processes. One of the key conclusions to be drawn from the Ombudsman’s Report discussed in my earlier post Cobb’s Paradox is alive and well  was that many of the projects that contributed to the $1 billion in failures were set up to fail – the projects had absolutely no chance of delivering within the announced parameters: the inputs to the portfolio selection process were grossly flawed (or were non-existent).

This appears to be a wide spread issue. Most project management standards such as ISO21500 and the PMBOK® Guide start with an approved project and a business case or similar that defines what has to be accomplished; this is the end of the portfolio selection process outlined above and is assumed to set realistic and achievable objectives.

What is missing, are the steps leading up to this point; the life of a ‘project’ starts with an idea, need, opportunity, requirement or threat (the ‘concept’). The organisation assesses and studies the ‘concept’ hypothesises options and solutions and frames a proposal that becomes the foundation of a future project. These key investigative elements of a project generally sit under the portfolio umbrella developing information to allow a proper decision to be made. In mining this can represent exploration, feasibility studies, ‘bankability’ studies and concept designs which between them can cost $millions, leading to project funding. Importantly, this ‘Front End Loading’ (FEL) is seen as the key to a successful mine in most major mining corporations.

Similar problems exist in major infrastructure projects, defining a solution to prison overcrowding can involve building a new major prison, building several smaller prisons, extending current prisons, changing the way criminal justice system works to reduce the need for prison places, or a combination of the foregoing options (substitute University/hospital/school, into the previous sentence to see just one dimension of the challenge). However, unlike mining, most government and many corporate organisations see effective ‘front end loading’ as unnecessary.

Other organisations use the process to formulate definitive solutions to problems they have no real understanding of (typical in ICT) and then pretend the defined solution has no associated risk (because it is defined) despite the fact the full dimensions of the problem the project is supposed to solve are still unknown, and are frequently changing over time.

The challenge, requiring informed judgement and effective governance is recognising which development processes suits what type of ‘concept’:

  • Sometimes, the ‘investigation’ requires a significant amount of work (eg, a bankability or feasibility study); this work may be treated as a project in its own right, and is time, cost and resource constrained with a defined deliverable (the report).
  • If the work is expected to flow forward and will only be stopped in exceptional circumstances, project phases work best, with some form of ‘gateway’ or transition review.
  • In other circumstances, studies are undertaken as part of the portfolio by corporate or PMO professionals with no dedicated budgets, assessing multiple proposals as an ongoing process, but once a concept gets the go ahead a project is created and a budget and resources allocated.
  • Other concepts (particularly problems) cannot be defined and an ‘agile’ approach is needed where elements of a partial solution are developed and put into use developing new learning that will then allow the next module to be developed in a progressive sequence. However, whilst this may be the most suitable and cost effective way of developing an effective solution, budgeting in a traditional ‘iron triangle’ concept of fixed cost, time and scope is impossible.

The challenge is recognising which type of project is being proposed (based on Project Typology), and then deciding which type of process will develop the best input to the portfolio selection process and what level of uncertainty (risk) is associated with the proposal once developed. Certainty is not important, what matters is appreciating the extent of the risks and the likely benefits, so an informed investment decision can be made. Most ‘game changing’ initiatives involve high risk, high reward projects that create a totally new future!

OGC Gateway™

The OGC ‘Gateway Reviews’ is a flexible process that addresses this part of major projects from the client’s perspective:
Gateway 1 = Business Justification, options identified and appraised, affordability, achievability and value for money established.
Gateway 2 = Procurement strategy, will the proposed strategy achieve the project objectives?
Gateway 3 = Investment decision, based on realistic project cost information (eg, tenders or bids) can the business case be confirmed from both the cost and the benefit perspective?
Gateway 4 = Readiness for service. The completion of the project work and a reassessment/confirmation of the expected benefits as the deliverable is put into ‘service’.
Gateway 5 = Benefits evaluation. Did we get what was expected now the project’s outputs are being used?

Summary

Most of the risks and rewards associated with a project or program are determined long before the project manager is appointed; if these decisions are wrong (or non-existent) project and program management cannot resolve the problem.

The role of effective project management is to deliver a realistic and achievable outcome efficiently; if the parameters for the project are unrealistic in the first place, the best project management can do is stop the situation deteriorating further! As far as I know, none of the various BoKs and methodologies, including the PMBOK® Guide has a ‘miracle’ process that will magically transform an impossible set of objectives into achievable set of objectives. Wishful thinking is not an effective substitute for effective project governance!

Proof of the blindingly obvious

We all know good scheduling leads to better project outcomes – certainly for me it’s been a article of faith for most of the last 40 years and ‘obvious’ from observation. But ask me, and any other scheduler I know to prove this fact and we would be hard pressed to come up with anything substantive.

Over the years there have been many surveys that link the lack of effective planning to poor project outcomes. One of the more definitive was undertaken by the CIOB in 2008 (download the report Managing the Risk of Delayed Completion in the 21st Century). But showing projects tend to fail if they don’t use effective planning and scheduling is not the same as showing that good planning and scheduling enhances the probability of success.

This has now changed! A paper published by Dr Dan Patterson, the CEO of Acumen, demonstrates a clear link between good schedules (defined as technically competent schedules) and good project outcomes.

Figure 1, taken from Dan’s paper Does Better Scheduling Drive Execution Success? Published in November’s PM World Today shows a strong correlation between the technical competence used to develop the schedule and the number of activities that finished on time. The data is based on a sample of 35 large projects ranging from US$15 million to US$30 billion.

Link the CIOB findings with Dan’s data and the message is blindingly obvious – if you are running a large project without a competent scheduler supporting the management team with effective scheduling, you are virtually guaranteeing failure!

Hopefully the work currently being undertaken by Planning Planet, CIOB and others to develop a framework (or frameworks) to train and qualify competent schedulers will mean in the next year or two there will be enough good schedulers to meet the demand from business and industry. For more on this see: Should you certify your schedulers?  and watch this space…. There are a number of announcements due in the next couple of weeks.