Getting Started with a Project Management Office (PMO)

For organizations tracking and managing dozens – or even hundreds – of projects, a solid project management office (PMO) proves crucial to project success. This article, the first of a six-part series, provides the first steps in creating an enterprise-wide PMO.

Today, organizations spend a large amount of their time delivering projects. While success rates have improved to approximately 34 percent, 15 percent of all projects still fail, and 51 percent are somehow “challenged,” according to research from the Standish Group. There are many reasons why projects fail — many of which can be attributed to a lack of visibility into long-term project needs. Without proper visibility, organizations are unable to see what is needed six months, three months, or even two months down the road, resulting in poorly constructed project plans that do not capture critical dependencies, including assigning project resources and key milestones.

While developing a software process improvement program can be costly, studies have shown that the resulting benefits of improved time-to-market, productivity and software quality far outweigh the initial investment costs. Establishing a PMO is the first step toward improving:

• Project, program and portfolio management best practices.
• Time-to-market acceleration.
• Quality of your initiatives in a cost-effective manner.

Getting Started with a PMO

Determining Your Organization’s Needs

The first step to establishing a PMO is to determine your organization’s needs. Start by examining the key processes in the areas of project, portfolio and program management as defined, for example, by the Project Management Institute’s (PMI’s) PPM/PMO framework. This framework has three levels of work (project, program and portfolio), each of which are broken down into 12 process groups (e.g., project initiation, project planning). The process groups consist of 92 processes in total, and these processes relate to the management of nine knowledge areas (e.g., scope, cost, time and resources). Examples of PMI processes/components include a project charter, project plan, work breakdown schedules and cost estimate.

You must also determine what type of management office best suits your needs (project, program or portfolio). In some cases, all three might be necessary but in order to help decide what is right for your organization, each is defined below.

A Project Management Office oversees a temporary effort with a definite starting and ending point. The Project Management Office helps development teams finish projects on time and on budget through the use of established best practices, while ensuring the finished project or product meets stakeholder requirements.

A Program Management Office oversees a collection of projects or portfolios that, when managed together, often provide greater benefits than if they were managed separately (for example, a compliance initiative or cost reduction initiative). A Program Management Office is typically tasked with providing an optimal mix of resources and achieving economies of scale.

A Portfolio Management Office oversees a collection of projects aligned to meet specific business objectives. For example, a retailer needs to reach out to 5 million new customers via the Internet. In this case, a portfolio could consist of e-commerce initiatives that support the common strategic initiatives related to establishing a Web presence. Key objectives of a portfolio management office include aligning portfolios of projects and services to business goals and managing risk exposure to the business.

To determine what management office best suits your needs, analyze the importance to your organization of each PMI process. For example, if your immediate issue is to improve project success rates, then consider starting with a project management office. If your immediate issue is the need to understand where your dollars are being spent, consider starting with a portfolio management office. The results of your needs analysis will guide you in determining which of the three offices is most suitable for your organization. It is also important to note that while the project and program offices are typically established first, there is no real predefined order you need to follow.

Determine Your Organizational Maturity

The PMO needs to demonstrate clear and tangible value in a relatively short period of time. It is important, therefore, to set up a process that quickly measures the PMO value to the enterprise. To do this, a baseline must be established. Steps to establishing a baseline include:
Assess your organization’s capabilities against industry-standard best practices, such as those defined by the PMI’s PPM/PMO framework.

Record your level of maturity in each of these process areas using a capability scale from 1 – 4 (active, efficient, responsive and business driven). These maturity levels will be detailed more in another article in the series: “Evolving the Maturity Level of Your PMO.”

Once the maturity level has been measured against the most important PMI processes, develop a “target" maturity level (again using the 1-4 scale for each process area) so your progress can be quantified.

If the organization is at a lower level of maturity, there may be little or no accurate data available from which to establish a baseline. In many cases, organizations simply do not know how much it costs to complete a project. If this is true in your situation, there are ways to overcome a possible lack of information. For instance, you can seek out historical data points, such as the length of projects and the number of developers who worked on these projects, to help extrapolate a cost estimate and a baseline from which to measure future successes.

Simply measuring total project cost may make it difficult to do an “apples to apples” comparison. However, there are ways of normalizing data so that such a comparison can be made. For example, the following metrics will provide a more accurate representation from which to compare costs between projects:

• Cost per use case
• Cost per function point
• Cost per thousand lines of code (KLOC)

Other quality metrics which may be measurable at baseline include:

• Resource utilization (percent of a developer’s time utilized/optimized)
• Defect rates

Establish a Measurement Plan

As mentioned, it is important to measure the positive impact the PMO is having on the organization. This will ensure that the PMO maintains the executive sponsorship it needs to effect organizational change. For this reason, the PMO should institute a measurement plan that defines key metrics for determining the organization's progress against the established baseline.

If you used a maturity analysis based upon the PMI framework to establish your baseline, use this same maturity model to measure your progress at periodic intervals. Some of the measurements cited above, such as “$ per use case” and “$ per function point,” should also be measured to gauge progress and calculate ROI.

Develop a PMO Rollout Plan

Next, you must develop a rollout plan for establishing your PMO. A high-performing PMO does not take form overnight and requires a phased approach to ensure incremental value. Best practices for a step-by-step approach to executing a PMO are covered in the next article in the series, “Implementing a PMO Into Your Organization.”