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Implementing a Project Management Office (PMO) for Innovation Projects
Posted on November 14th, 2016 by Stephen Toton in Chemical Manufacturing Excellence
After you’ve established an effective portfolio management process, a standard stage gate process and financial metrics, it’s time to consider implementing a Project Management Office (PMO) across the enterprise. Here’s how Wikipedia defines a PMO:
“A project management office, abbreviated to PMO, is a group or department within a business, agency or enterprise that defines and maintains standards for project management within the organization. The PMO strives to standardize and introduce economies of repetition in the execution of projects.”
I must confess, the first time this was proposed to me as an innovation leader, I thought this was going to feel like a corporate police organization second-guessing project execution. But like many innovation best practices, it comes down to the benefit, the responsibilities, the governance and the implementation method.
Your business and / or enterprise may have hundreds of innovation projects that are at various states of maturity. Each will have demands for resources and commitments to schedules, milestones and potential financial targets. The PMO value is to monitor the execution of these projects and identify gaps in resources, schedules and changes in financial commitments.
With access to this information, the PMO should recommend course corrections, fill gaps and reduce waste. In theory that sounds great, especially to business leadership and the C-suite – the problem is “how the information is collected”, “how conclusions are made” and “how changes are implemented.” After all, aren’t the project and innovation leaders accountable for their individual projects (you can see the potential conflict here)?
The PMO is usually a full-time role, with an experienced innovation leader. Depending on the size of the enterprise, the PMO leader may have analysts and / or project planners reporting to them. The primary responsibility is to collect and analyze project information leveraging corporate standards. If your enterprise does not have standards in Stage Gate, Portfolio & Project Management and Metrics, I strongly suggest you implement this first. You can read some of my previous blogs to get started.
Collecting project information without a standard Project and Portfolio Managements system can be very manually intensive, with several iterations and discussions with project leaders. In the beginning, the precision of this information will be low. The PMO has a key responsibility to analyze the information and to report key gaps and insights to business and innovation leadership in a way that optimizes the performance of the portfolio.
So gaps may include stage gate and milestone performance, resource allocation, project leader assessment, financial metric changes, commercial launch timing, etc. Obviously these metrics can be very sensitive and must be handled in a proper way.
If done properly, the PMO is a great source of information to satisfy corporate needs for project performance and for forecasting future revenue targets that are aligned with business growth strategies.
I believe there are three levels of governance with the PMO. The Consultant, the Coach and the Leader. Each level has its advantages and disadvantages. However, what’s at stake is the level of trust or mistrust that’s created between the PMO and Project / Innovation Leadership.
Regardless of which level you decide on, I’d start here. The Consultant role performs the PMO responsibilities, but generally just provides data analysis and reports to business and innovation leaders. The PMO in this case accepts no accountability for the performance of the project portfolio and has very little ”skin in the game.” In most cases, it may operate within a function such as R&D and behaves similar to a finance function. If you’re starting here, I’d be very careful how the information and observations are shared. It may be best to start with information sharing within the innovation organization.
This role has more “teeth” and adds more value to the enterprise. This is where you need an experienced innovation leader to access the information and create a dialogue with project and innovation leaders in a way that influences change in project performance. The PMO Leader acts as an advisor to project / innovation leaders, business leadership and the C-suite, providing insights to the innovation portfolio and making recommendations on resource allocation or portfolio priorities. The PMO Leader may negotiate with functional leaders in the enterprise to bring resources to help troubled projects. The PMO Leader will be active in training project leaders and engaging them in best practices. One example could be leading a monthly network meeting with project leaders and sharing success stories. When this role is functioning well, trust is high and project / innovation leaders are proactive in asking the PMO Leader for help.
This role has accountability for resource loading, budget allocation and portfolio performance across all projects. The PMO role here will have a larger staff of resource and project planners that are integrated within all the projects. In some cases, all the project leaders report into this function. This degree of governance happens in highly mature organizations that have a very sophisticated project management culture. Examples may be large IT organizations or government contractors. Obviously there’s a high importance on execution in this enterprise.
In my experience, there’s value in having a PMO function. In an innovation environment, I like “the Coach” role, where everyone has “skin in the game” and benefits are realized. In any case, you need to monitor trust, and avoid being perceived as a police function.
All opinions shared in this post are the author’s own.
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