What is a PMO, and Why Do You Need One?

It seems like everyone in the project management profession today is talking and writing about the “Project Management Office” (PMO) and why it’s so important for every organization that manages projects to have one. You’ve probably read articles about PMOs in the leading project management and business publications and wondered, “What is a PMO, and why do I need one?” Hopefully, this post will answer that question.

First, what is a PMO? The Project Management Institute, a leading authority on the subject, defines it as an organizational unit whose roles may include some or all of the following:[1]

  • Development and implementation of project/program management standards, methodologies, and processes.
  • Implementation and support of project and knowledge management tools.
  • Project/program governance, delivery management, and performance management.
  • Talent management, including training and certifications.
  • Strategic planning and portfolio management.

A PMO may be formed at any level within an organization. It may be dedicated to a single project or program or serve in an organization-wide capacity, providing strategic planning for and supporting execution of all projects, programs, and transformation initiatives. Organization-wide PMOs have the authority to cross internal boundaries (the dreaded “stove pipes”) and often enjoy high visibility with C-level executives (a good thing!) to align projects with the organization’s strategy.

Well, that sounds nice, but what does all this “consultant-speak” really mean? In other words, how would having a PMO benefit your organization? After all, your organization will have to devote staff resources to stand up and operate a PMO. That costs money, so where is the Return on Investment (ROI)?

To answer these questions, allow me to refer to two basic principles:

  • Successful project management is “doing projects the right way”. Organizations should implement and apply project management policies, processes, tools, and training to ensure projects achieve their cost, schedule, and performance objectives. This is the standard “Project Management 101” methodology you’ve read about in A Guide to the Project Management Body of Knowledge (PMBOK) and other textbooks, but a PMO serves as a dedicated group of professionals that develops, supports, and promotes the proper use of this methodology.
  • Successful program management combines “doing the right projects” with doing projects the right way. Under this principle, organizations would only undertake projects that have a compelling business case. This means that every project an organization undertakes should exhibit at least one of the following characteristics:
    • Has a positive ROI, meaning it is expected to reduce costs, increase revenue, or both, over and above the expected cost of the project itself.
    • Is necessary for, or supports, legal compliance. For example, a company may be satisfied with its present financial accounting system, but if that system does not follow the requirements of a new law, regulation, or standard, it must be upgraded or replaced. (I’m thinking of the changes driven by Sarbanes-Oxley here.)
    • Supports the organization’s strategic objectives. Such a project may have a negative ROI, but it enables a key organizational initiative that will have a positive ROI.

Now, I’m sure you’re wondering how PMOs fit into all of this. A few years ago, the Project Management Institute conducted a survey of PMOs. These PMOs completed an average of $100 million worth of projects in 2012 and delivered approximately $71 million in added value through revenue increases and cost reductions.[2] Also, the PMOs that aligned their projects with their organization’s strategy reported 27% more projects completed successfully and 42% fewer projects suffering from scope creep.[3] The key benefit of visibility within the C-suite is that people at lower levels of an organization tend to leave projects with high-level sponsors alone; they don’t relentlessly try to cut their funding (often in favor of their own pet projects) or promote scope creep.

The bottom line is that a well-functioning PMO can make a big difference to an organization’s effectiveness at project and program management. This means you’ll have better decision making, and this will be reflected in the organization’s financial performance. This leads to happier executives—and happier project managers!

Do you have experience working with, or within, a PMO that you’d like to share?

Do Good. Have Fun. Add Value.

 

 

 

 

[1] “Pulse of the Profession In-Depth Report: PMO Frameworks,” Project Management Institute, November 2013. Downloaded from http://www.pmi.org/learning/thought-leadership/pulse

[2] “Pulse of the Profession In-Depth Report: The Impact of PMOs on Strategy Implementation,” Project Management Institute, November 2013. Downloaded from http://www.pmi.org/learning/thought-leadership/pulse

[3] “Pulse of the Profession Report: The High Cost of Low Performance,” Project Management Institute, February 2016. Downloaded from http://www.pmi.org/learning/thought-leadership/pulse

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