Tuesday, 28 October 2014 00:00

The Strategic Dilemma of the Central PMO - Friend or Foe?

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Central Project Management Offices (PMOs) have expanded since the 90ies from traditionally project-driven industries, such as aerospace, defense and heavy construction industries to non-project driven industries. It was mainly due to the looming recession that the benefits of using project management, such as improved efficiency and quality of delivery, were now recognized as being applicable to other industries as well.

However, the way how Central PMOs are being understood and used is significantly different from organization to organization. In mature companies, they are able to position themselves as true partners for the Executives and are generating value through delivering projects, providing a common methodology for the organization or driving project portfolio decisions or performing all of those activities. In immature markets, however, where the role and benefits of PMOs are not well understood, they find themselves caught in a strategic dilemma which negatively affects their effectiveness in performing their role.

Why is this so?

Traditionally, the power of the organization has been residing with the line functions. This organizational model has supported the division of labor and the rapid economic growth of the age of industrialization. Projects were delivered by the different departments of the line organization, with differing levels of quality and consistency.

In immature markets, where there is a quasi-monopoly or duopoly, varying outputs are not creating too many problems. However, where competition is strong and quality of project delivery needs to be at consistently high levels, even small mistakes will make themselves felt very quickly and lead to a huge competitive disadvantage. That is why most organizations immature markets were looking to avoid further project failures and proceeded to formalize central units to establish common standards or to otherwise enforce consistency in project delivery. Over time, many of those Central PMOs have moved forward from this basic task of providing project oversight and standardization to offering Executive decision-making support for the Corporate Project Portfolio.

However, in immature markets, where the power of the organization still resides in the line and there is no or only limited Executive support, PMOs at best have two strategic options.

EITHER PMOs become the “friends” or “servants” of the organization, by offering their expertise and manpower randomly to whichever department is most in need of support or most readily accepts external involvement. In the worst case, the PMO is degraded to a pool of resources that can be deployed at the whim of Executives’ personal preferences. This model falls short of the real task of the PMOs of providing standardization and project oversight.

OR they try to fulfill their mission of providing Executive support by providing at least basic visibility, uncovering the ‘real picture’ of project delivery and progress in the organization through project reports and project audits. This approach represents a move closer to their real task of providing visibility to the Executives but will create tension with their peers in the functional departments, with the effect that the PMO might be shut out of the information chain altogether. Without Executive support, they will be bypassed in the information chain and will not be able to perform their role any more. PMOs which are trying to avoid a healthy level of conflict with the line organization, yet want to provide visibility, might want to concentrate on information aggregation rather than quality control. Their role becomes purely secretarial, orchestrating meetings only, but not improving project delivery standards.

So, what can be done?

Move into project delivery

If there is only a very low level of Executive support, the best option could be to move slowly towards project delivery. The projects that are handled by the Central PMO will be following their own standards and thereby will have a minimum of quality and consistency attached to them. The Central PMO will be able to ‘lead by example’ and show the benefits of applying their project management methodology. Executives will see the value of the ‘delivery machinery’ and will entrust this new unit with more and more responsibility.

Educate the organization

Executive buy-in can be obtained much more easily if there is a clear understanding of the value that a PMO can provide. Trainings at Executive level as well as benchmarks with more mature organizations can help let a desire for more central project oversight and control sprout among senior staff. In addition, it is recommended to find allies in the organization, such as Finance, Internal Audit and Legal who are suffering from inconsistent project delivery and to join forces in enforcing certain minimum project management requirements.

Disband the Central PMO

However, a PMO with zero Executive buy-in will not be sustainable in the long run in the company. If that is the case, it is a strong sign that the time is not right for a Central PMO and it might be a better choice to disband it and redeploy the resources where projects are currently being delivered.

Conclusion

Market maturity, competitive intensity as well as Executive buy-in are important drivers in the strategic evolution of Central PMOs. In immature markets, with limited Executive support, PMOs should ultimately move into project delivery or will be disbanded.

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Inken Lasar

Inken Lasar is a business strategy consultant with more than 13 years’ experience in the areas of business and commercial strategy, management consultancy, marketing and portfolio management. She excels in driving business results through the establishment and successful operation of the corporate planning process. Currently, she is heading the Project Portfolio Management division in a leading telecom player in the GCC.

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