How to Establish and Lead a Project Management Office (PMO)

Introduction

Every project aims to deliver unique outputs and outcomes intended to solve problems within specified constraints like time, cost, quality, etc… Associations such as the PMI, ASAPM (US), APM (UK), GPM (Germany), PMAJ (Japan), and IPMA continue to empower project management professionals, businesses, communities, and societies worldwide with standards and best practices based on state-of-the-art research. There are millions of project management practitioners striving to deliver successful projects with better outcomes every day.

The impact of projects on strategy forces organizations to utilize the best project management processes and methodologies to maximize the realization of benefits within increasingly complex environments. According to a study by PwC, “Organizations that execute projects successfully employ effective project management practices as a tool to drive change and achieve business objectives.” Effective PM processes include measuring progress, managing risks, and properly selecting the right projects in alignment with organizational priorities.

A Project Management Office (PMO), whether internal or external to the organization, can achieve this standardization as one of many other functions.

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What is a PMO?

A PMO is a centralized and coordinated management entity within an organization that defines the standards of project management processes, provides governance, enforces accountability, and aims to enhance efficiency, optimize synergy, and establish discipline among projects in a consistent and objective manner.

As the number and complexity of projects managed by single organizations grew, PMOs became increasingly mission-critical. Companies with a PMO increased from 47% to 80% from 2000 to 2012 according to PMO 2014 Research Report. Today, they are a dynamic component in every project-based organization. PMOs serve as an essential partner to other units creating a platform for decision-making and organization-wide communication.

According to a study in 2020, more than half of the respondents (52%) were somewhat or very dissatisfied with the current level of project management maturity within their organization. The figure has grown steadily since the 45% rating in 2016 (Wellingtone, 2020). Only 40% of the project and program governance activities of organizations are considered very effective according to a study by KPMG in 2020.

Moreover, up to 59% of project managers run two to five projects simultaneously. Only 15% work only on one project, while another 15% take on more than ten. Meanwhile, according to a recent survey, only 11% do six to 10 projects at a time.

It is eminent that organizations need to use a centralized PMO to synchronize project activities. PMOs are expected to also increase in scope and responsibilities, up to 72% from 61% in 2019 (Wellingtone, 2020). According to the same study, 89% of organizations have one or more PMOs, with 50% having more than one.

There is a growing demand for services offered by PMOs in different industries such as real estate, engineering, manufacturing, and organizations that deliver a high volume of projects. According to the Project Management Institute, PMOs can even enhance success metrics related to customer satisfaction and revenue growth.

Project environments are very dynamic. There is a constant need to respond to the changing environments by deploying systems, structures, functions, capabilities, processes, and assets. Organizations must increasingly adapt to the new changes. PMOs can be great avenues for executing changes and support adaptation within an organization.

PMO Benefits

Organizations struggle to standardize project management practices and methodologies across project teams. PMOs are the core of successful project management in organizations. They offer a diverse set of functions to support and ensure project success. Here are some of the top benefits of a PMO:

• Define, standardize, and maintain best practices and processes across departments by enhancing compliance and governance to project management standards and methodologies and offering direction and guidance to project managers.
• Help organizations successfully deliver projects efficiently with predictable consistency by managing and allocating resources across projects based on schedules, priorities, and budgets.
• Provide accurate and up to date financial and status reports to upper management and executive leadership which will foster decision making based on defined metrics and KPIs across active projects.
• Define project selection criteria and manage organizational portfolio to align investments with business goals and organizational strategy.
• Improve productivity, standard practices, and stakeholders’ satisfaction by setting common project culture, cross departmental communication, training on methodologies, techniques, and best practices.

Types of PMOs

• Supportive: A supportive PMO has a low degree of control. It supports all projects in an organization, provides training, and supplies best practices and templates. It operates as a consultant or advisor. It is the knowledge hub and a go-to source of best practices, training, and lessons learned.
• Controlling: With some degree of control, a controlling PMO checks if the project management tools, standards, and processes are being applied in the projects. It doubles up in function as an auditor on one hand and an advisor on the other.
• Directive: A directive PMO maintains a high degree of control in the project management process within the organization. It is directly responsible for the execution of projects. Project Managers report directly to the PMO instead of them operating as a separate function or organizational group.

PMO Components

A PMO’s effectiveness rests on three interdependent components: functional, structural, and disciplinary. Though different, each complements the other in bringing forth the purpose of the PMO. You need to look at each component individually and then collectively to insure a successful PMO implementation.

Functional

A functional component of a PMO is defining its purpose or role within the organization. The functional component can be:

• Standards Settings: Standardizing processes, templates, and systems as well as mentoring, training, and coaching of project managers.
• Portfolio Management: PMOs can manage projects and programs, a set of related projects. They also ensure only projects and programs aligned with organizational strategy are executed.
• Governance: Audit and review project management processes and ensure project managers are adhering to them.
• Project Delivery: Tracking projects progress, identifying, and highlighting risks to managers.

Understanding and defining the scope of the intended PMO is an important step that defines how a PMO will function.

Structural

The second component of the PMO is its structure as it relates to People, Processes, and Tools.

• People: PMO personnel who are at the core of its leadership. They need to be well versed in project management methodologies and tools, objective, strategic thinkers, and comfortable communicating with higher management.
• Processes: The processes are based on the disciplines the PMO manages. Processes should be practical, adaptable, and scalable. It is worth mentioning that process optimization should be performed before automation.
• Tools: are the systems, templates, and knowledge that are tailored to the users. They could range from simple templates to sophisticated project management systems. Most importantly, the tools need to incorporate the disciplines, capture required information, and provide required reporting and KPIs.

Disciplinary

The third component is related to the project management disciplines managed by the PMO. The main disciplines of PMOs are:

• Resource Management: Resources include people, equipment, tools, and other assets. It can also entail vendor and management and contract management and control.
• Communication Management: act as a middle man between project managers who provide project information and stakeholders concerned with progress and status reports.
• Project Execution: makes sure projects’ KPIs and metrics are within acceptable ranges and takes corrective decisions to adjust accordingly.
• Risk Management: Tracking projects’ progress, identifying, and highlighting risks to managers. PMOs also manage risks resulting from change management.

Setting up a PMO

If you were mandated with setting up a PMO, you may be overwhelmed and concerned about your chances of success. You have to be able to describe the value of the PMO to your executives and make sure the team does it right. Like project implementation, setting up a PMO needs an equal amount of assessment, planning, and analysis. To establish a successful PMO, you need to respect the below steps:

Assess Current State

If you are setting up the first PMO in the organization, you need to ask about its objective. What are the requirements with respect to the functional, structural, and disciplinary components? What is the maturity of the current project management processes? What is the desired target the organization would like to achieve by setting up the PMO?

Answering these questions will help you understand the current status (PMO Maturity) as well as the required future state. This will help you highlight the gaps and identify the areas and level of intervention across people, processes, and tools. In your assessment, you need to figure out the components that make up a PMO and which ones are relevant.

Define Roadmap

Now that you have defined the components required, and areas of intervention, you need to create a step-by-step roadmap for your PMO setup and optimization. It is very common that there will be more than one objective to achieve your goal. You should keep in mind the strategic view of the organization, and prioritize the stakeholders requirements accordingly. Avoid common pitfalls to boost your chances of PMO success like getting buy-in on your execution plan from your team before your start.

While you are defining your roadmap, you also need to spend time on identifying your PMO performance KPIs as well. Make sure that your KPIs are relevant by getting agreement on them from the appropriate stakeholders. PMO KPIs fall into different focus areas like

1. Practices, Methodologies, and Tools
2. Solution Delivery & Execution
3. Monitoring & Control
4. People and Capabilities

Proper and timely collection of data is required for analysis and demonstration of performance KPIs.

Implement

With all set for take-off, head for the roadmap and plans laid out first. Implementation of a PMO requires diligence and a unique approach. Always keep the goals and objectives in mind with a stern eye not to deviate from the plan. Ideally, the PMO needs to comply with the organization’s standards while helping people with their projects. Achieve small wins as quickly as possible to establish confidence in what a PMO can do by applying Pareto Principle^[1]. For example, you can

• Use root cause analysis to identify processes causing the highest number of issues and fix those first.
• automate the most tedious tasks which consume a lot of time and does not require human intervention.
• setup automatic notifications and reminders to avoid missing deadlines, milestones, and reports submission.

It is imperative to know that during your PMO implementation, you should communicate your progress and address all possible concerns in a timely and frequent manner. Effective communication makes organizational change a smoother process as well as keeps your stakeholders informed of the progress.

Review & Improve

Setting up a PMO is a process but leading and managing one is a different story. To keep your PMO successful, you always need to align with both the short and long-term goals. You need to constantly review, improve on, and exploit opportunities as they become available. Continuous improvements will enhance the growth and maturity of the people’s skills and knowledge, project management processes, as well as the systems and tools. A PMO is not a stagnant entity. It evolves iteratively. You need not only to collect data on projects but also review and improve your PMO performance and KPIs to create and deliver value. Below are some KPI examples:

• Completeness KPIs for tasks, milestones, projects, etc…
• Resolved interdependencies between different projects and programs
• Strategic Alignment KPIs for portfolio management
• Realized benefits of delivered projects and programs
• Resource utilization KPIs

Always align your PMO to the key drivers of the organization, and update this alignment as the organization shifts its strategies. This will help the PMO to grow and evolve to the extent of its organization’s acceptance; this is something that the PMO leadership must actively work on. The true success of a PMO cannot be measured quantitatively alone – key qualitative assessment is imperative in demonstrating the benefits of the PMO and continuously showcasing its value to the organization.

Characteristics of a Successful PMO Leader

PMO vs PM

A project manager works back to back with the PMO. A project manager is concerned with delivering projects with successful results while the PMO is concerned with other functions like standards settings and process management. Although the two work closely together, the structure and experience required in each position is different. About 78% of organizations have a project management team set up before a PMO comes along. They bring in PMOs after laying out the project management procedures. This could explain why PMOs seem like administrative units. Organizations need to understand the difference between a PM and a PMO.

Another common mistake organizations do is to mandate the creation of their PMO to their lead project manager. A successful project manager may not be as successful in standards, process design, and management. To succeed in your PMO setup, your PMO leader should be:

1. Enthusiastic about project management processes, methodologies, and tools
2. A visionary business leader with strategic thinking and effective communication skills
3. Understand the effort and organizational change required to set up a PMO
4. Knowledgeable and up to date with the latest trends in project management and PMOs
5. A person with interpersonal, negotiation, and influential skills
6. Has the right balance between process adherence and stakeholders’ requirements

Five Tips for Successful PMO Implementation

1. The guidelines and principles of implementing a PMO exist. However, you should use them as a reference only. A one size fits all approach will not be beneficial as each PMO will have its own journey.
2. Do things right and do the right things. Creating standards and achieving proper levels of governance is one part of setting up your PMO. Another part entails setting priorities and delivering the needs and benefits for the organization. These two require proper attention and differentiation between doing the right things and doing things right.
3. Your team is a decisive factor in your PMO’s success. Work hard to suffice their needs, recognize their efforts, add to their knowledge, and improve their skills through training and mentorship.
4. Catch the low-hanging fruits first by achieving quick wins that will pave the way to organizational change. Set up teams for testing and piloting to get as much feedback as possible to improve and enhance before your roll out the change across the whole organization.
5. Keep your PMO aligned with your organizational vision and strategy. Understand the change required and develop your systems, processes, and people accordingly.

Conclusion and Outlook

The value of a PMO is achieved when projects are delivered within budget, and on schedule and organizations are efficient and effective in their line of operations. Setting up a PMO is most beneficial when done in a way that complements the existing organizational structure. A successful PMO is a catalyst for greater efficiency and allows the performance of quality work with less risk and fewer resources.

While appreciating the benefits PMOs bring to an organization, it is also important to understand the effort and organizational change required to set up one. As such, many organizations would opt to outsource the function to enhance their operational efficiency, focus on project delivery, minimize operational risk, and as a quicker way to create and scale business.