Creating a Project Management Office (PMO) can drastically improve project efficiency, organizational clarity, and project success rate. How exactly do you go about setting up a PMO? More importantly, do you even need one? I’ll answer these questions and more in this in-depth guide to project management offices
Understanding Project Management Offices (PMO)
Before we do a deep dive into the fundamentals of setting up a PMO, let’s first answer the fundamental questions - what is PMO and why do you need one?
What is a PMO?
A Project Management Office - usually shortened to just 'PMO' - is a department or group within an organization dedicated to implementing and improving project management practices.
The PMO accomplishes this by defining and maintaining standards for every project undertaken by the organization. Its goal is to use the learnings from past projects, best practices, and case studies to improve the success rate of all future initiatives.
It's important to understand that the PMO isn't involved in the day-to-day management of projects (that's the project manager's job). Rather, it acts as a support center for project managers, giving them transparency, documentation, and governance guidance.
Essentially, its job is to answer the question: "What is the best way to tackle this project?"
What Are the Responsibilities of a PMO?
Howsoever it might be organized - as a small group, a dedicated department, a 'center of excellence' - a PMO has a few core responsibilities:
- Develop project management methodologies: One of the foremost responsibilities of a PMO is to develop a project management methodology that can be used across the organization - with minor modifications of course.
- Establish best practices and processes: PMOs evaluate, consolidate, and standardize processes across all departments with the goal of creating a set of repeatable best practices to improve project success rate.
- Strategic planning: A key PMO responsibility is to help C-level leaders in selecting and budgeting projects based on the business' long-term strategic goals.
- Governance: PMOs set regulations, functions, policies, protocols, and procedures for managing projects across all departments.
- Establishing culture: The PMO helps develop a uniform culture and mindset for approaching projects across the organization. The goal is to ensure that everyone in the organization is on the same page and that there are no communication gaps.
- Managing resources: The PMO takes an organization-wide approach to managing resources, ensuring that they're distributed as necessary across the entire business.
- Develop archives: The PMO acts as a record keeper, storing all important files, templates, and documents related to past projects.
- Coaching and decision support: The PMO coaches project teams, onboards new members, and develops decision-making frameworks for team leaders.
One way to understand a PMO's responsibilities is to see it as a "think tank" that guides project managers on how to best do their jobs. It maintains records, establishes best practices based on past projects and theory, and ensures that there is uniformity in how the organization approaches each project.
The more projects your organization has, the more important it is to have this uniformity and consistency.
What are the Benefits of a PMO?
To understand the benefits of a PMO, you have to first understand the reasons why projects fail.
As we wrote in an earlier post, projects often fail not because of a lack of talent or budget, but because of poor project management practices.
36% of projects fail due to poor PM practices
And a lot of projects fail. PMI estimates that for every $1 billion spent on projects, $135M was “at risk” due to the threat of failure.
Since project failure is often attributed to poor project management, creating a dedicated department for standardizing PM practices, i.e. a PMO, can reduce failure rate.
In fact, according to a Gartner survey, 70% of organizations that implemented a PMO reported an improvement in project success rates.
Another survey by KPMG found that nearly 80% of organizations rated their PMOs to be “moderately” to “extremely effective” in supporting change within the organization.
You can gauge the impact of PMOs by their ubiquity across organizations. According to PMSolutions' "State of the PMO" report, 85% of firms had a PMO in place in 2016, a figure rising to 95% for large firms.
There is also a steady increase in the number of organizations implementing PMOs. In PMI’s annual survey, 71% of organizations reported having a PMO - an increase from 61% in 2007.
PMO adoption rate has grown steadily across firms of all sizes in the last ten years
That’s for statistics, but what are the real-world, practical benefits of creating a PMO?
Chiefly, a PMO helps your business to:
- Improve project accuracy in terms of budget, schedule, and resources by drawing insight from past projects. This ensures that your projects meet time and budget requirements, thereby improving success rate.
- Centralize all project data and help managers make better, data-backed decisions. This also helps businesses link project decisions with long-term strategic goals.
- Reduce project costs by improving accuracy. Being more accurate from the beginning reduces the need to make substantial changes - a big reason for cost overruns.
- Improve consistency in standards and practices across all projects. This not only gives managers a template to follow for future projects, but also makes it easier to analyze project performance.
- Improve productivity on projects by standardizing project management processes.
Whichever way you look at it, creating a PMO has plenty of benefits for your business. This is particularly true for growing businesses that handle a large number of projects, such as an agency.
Do You Need a PMO?
Not every business needs a PMO - at least not in its initial stages. You can run a perfectly competent agency or business without one.
To know whether you could benefit from a PMO, ask yourself these questions:
- Are different parts of the business working in harmony?
- Are top executives and stakeholders satisfied with the way projects are being run?
- Does the business have a consistent methodology and process for delivering projects?
- Is there clear ownership and accountability of new and ongoing projects?
- Do top stakeholders have sufficient visibility into project performance?
If the answer to these questions is “no”, you might need a PMO.
A PMO isn’t an all-encompassing panacea for your business’ woes, but it will solve a lot of management issues that plague growing organizations.
In the next section, I’ll share a step-by-step process for creating a PMO for your business.
How to Create a PMO
There is no fixed recipe for creating a PMO. It can be as expansive or constrained as your business needs. It can take a temporary supportive role, coming together to assist project managers in difficult projects, or it can be a permanent department that directs every aspect of every project.
Creating a PMO, therefore, requires a thorough analysis of your own business requirements. A small business with few stakeholders likely doesn’t need a directive PMO. A large business, on the other hand, might find limited utility for a temporary supportive PMO.
The PMO implementation process can be broadly divided into three phases:
- Evaluating your current requirements and project management maturity
- Defining the PMO’s roles and responsibilities
- Implementing the PMO
Before you can start this process, however, you first need to understand the right PMO model.
Choosing a PMO Model
While there are several different PMO models (which we’ll share below), the most common approach is to use one of three models as given by PMBOK Guide.
1. Supportive PMO
A supportive PMO takes a consultative role in project management. It offers templates, best practices, training, and access to data as and when needed.
This type of PMO offers low-level of control over projects and teams. It usually doesn't have the authority or the intention of directing project managers. Instead, it acts as a repository of knowledge, ready to help managers when called upon.
Supportive PMOs work best in organizations that already have a high project success rate and only need a centralized data center to support decision-making.
If the different parts of your agency are running smoothly, a supportive PMO model might be for you.
2. Controlling PMO
A Controlling PMO has a consultative as well as a supervisory role in project management. It not only gives project managers documentation and data, but also exerts a degree of control by directing them to use specific processes and policies.
This type of PMO works best for organizations that have competent project management practices but require some additional control over protocols and processes.
3. Directive PMO
A Directive PMO essentially takes over a project and directs all its execution. The PMO maps project requirements, assigns resources, and works directly with project managers and stakeholders to ensure smooth delivery.
In a Directive PMO model, the PMO assumes all responsibility of managing the project. It also works with senior leaders to ensure that projects meet the long-term strategic goals of the business.
Such PMOs work best in large organizations that have a lot of projects and need consistency across all departments.
For most businesses and agencies, a Supportive or Controlling PMO would suffice.
Besides these three broad PMO models, there are other ways of classifying PMOs as well. PMI, for example, categorizes project management offices into five different models:
- Project-specific PMO: This is a temporary PMO created to support a specific project or program. Usually used on complex projects that require substantial guidance for successful delivery.
- Organizational PMO: Also called a "department PMO", this PMO offers project-related services to support a specific department or business unit. It plays an active role in all the department's projects but has limited authority across other parts of the organization.
- Project-support PMO: This type of PMO adopts a supportive role in the business' projects, offering data, documentation, templates, etc. You can see it as the equivalent of the Supportive PMO in PMBOK's models.
- Enterprise PMO: This is the highest level PMO, working directly with senior leaders to align projects to the business' long-term strategy. The Enterprise PMO has substantial control over every aspect of the business' projects and programs. Large organizations often have an EPMO working alongside a regular PMO.
- Center of Excellence: This offers a "think tank" approach to PMO, giving project managers access to standardized processes, methodologies, tools, and strategies.
You can get an idea of the kind of model organizations usually chose by looking at their PMO’s responsibilities. According to one survey, these are the most common responsibilities for a PMO:
In the next few steps, you’ll learn how to choose a PMO model that’s right for your business by analyzing its goals and requirements.
Phase I: Evaluate Your Current Requirements and Project Management Practices
As with so many PM endeavors, the PMO creation process too starts with introspection.
Chiefly, you're looking to understand the maturity of your existing project management practices and how you stand to benefit from a PMO.
As Jen Miller, writing in CIO says:
So how exactly do you start this self-analysis process?
This is a three-step process:
1. Analyze your existing project management maturity
What kind of PMO approach you adopt will depend greatly on the maturity of your existing project management practices. An organization with mature PM practices will benefit a lot more from a high-control PMO than one with barely a formal PM methodologies in place.
To analyze your existing project management maturity, do the following:
- Make a list of project management methodologies used, if any (such as PMBOK, PRINCE2, etc.).
- Make a list of all current projects, their complexity, size, and what formal PM processes they use.
- List your current project managers and their experience and formal training in project management (for example, whether they have PMP certifications).
- List your past projects and analyze their failure rate, delay in delivery, etc. Try to figure out what was the cause for these failures and delays.
Based on this analysis, you can classify your business’ project management practices as “high”, “moderate”, or “low” maturity.
2. Analyze stakeholder concerns
A PMO is essentially a political entity. Depending on how it is structured, it can have sweeping authority to direct projects across departments.
For obvious reasons, your stakeholders - project managers, senior leaders, C-level execs - would have concerns about this office.
Therefore, your next step should be to undertake a stakeholder analysis and understand their concerns.
This analysis should focus on:
- Figuring out the top stakeholders that will be impacted by the PMO
- Mapping each stakeholder's concerns and goals
- What benefits each stakeholder expects from the PMO
Your goal should be to give every stakeholder a clear value proposition. This will make it much easier to create a PMO with sufficient authority later.
3. Conduct a gap analysis for quick wins
Your third step should be to figure out the gap between where you currently are and where you should be with your PM practices.
Look to the PM maturity analysis you did earlier to figure out these gaps. Find practices that haven't been standardized and list how they could be improved with a PMO (and what benefits they can deliver).
For example, if you currently don't have a centralized repository of project data, creating one will deliver immediate results in the form of greater insight and visibility. This can win over project managers and senior leaders who might be skeptical of a PMO.
Once you've identified these gaps, make a list of recommendations. Focus on quick wins since these are critical to winning over stakeholders in the initial phases of a PMO rollout.
Phase II: Define the PMO’s Roles and Responsibilities
The next step in the PMO creation process is to define its mandate. Everyone in the organization - most of all the PMO itself - should know precisely what the PMO's roles and responsibilities are.
There are three key things you should define in this phase:
- Hierarchical position: Where does the PMO stand within the business' hierarchy? Does it operate mostly at a project-level or does it interface with C-level leaders? This will help you understand the scope and authority of the PMO.
- Responsibilities: What responsibilities does the PMO have? Is it going to have a merely consultative role, or will it also have directive capabilities? Much of this will depend on the analysis you completed in the previous step. A sufficiently mature organization, for instance, might not need to give the PMO substantial responsibilities.
- Competencies: What core competencies should the PMO have - resource management, benefits management, supporting decision-making, etc.? These competencies will spring from the PMO's responsibilities. For instance, a project-support PMO will need to be competent in preparing documentation and analyzing data.
This is where the analysis you completed earlier will help substantially. From the PMO's responsibilities to its competencies, everything will depend on the gaps in your PM practices and stakeholder concerns.
For example, if your analysis shows that you have limited formal project management capabilities, the PMO's top focus would be to develop and standardize PM practices.
To make this possible, the PMO will need:
- Personnel who are trained in formal PM methodologies and processes
- Can train other managers and team leaders in PM methodologies
Similarly, how much control the PMO has within the organization will depend greatly on your stakeholder analysis. If you can't get senior leaders onboard, it will be difficult to create a Directive PMO.
It's important to be realistic here. Far too often, PMOs fail because they're given too many responsibilities or try to please every stakeholder. It's best to limit the office to a handful areas of service - at least in initial rollout - to improve its chances of success.
Once you've undertaken this exercise, clearly state the PMO's purpose and its mandate. Make this succinct and easy to understand.
A single statement like this works well enough:
"To define and maintain project management processes, methods, and tools".
Make sure that all project team members know about the PMO and its mandate. Make the PMO easy to reach and encourage employees to use it (especially if the PMO is in a supportive role).
Phase III: Implement the PMO
Once you've analyzed the PMO's competencies and responsibilities, you can jump straight to the implementation phase.
This phase involves three steps:
1. Determine resources required for the PMO
Start by identifying what all resources you need to create the PMO. This should include both tangible (such as an office space) and intangible resources (such as access to key documents).
Here are a few things you should list in this step:
- Employees required to create the PMO
- Office space and equipment requirements
- Access to documents and project data
- Access to communication channels
- External resources required, if any
2. Select and train PMO staff
Next, identify the key skills you need to run the PMO. Then make a list of which of these skills you already have access to, and which you need to train for.
Unless your business already has substantially mature PM practices, you'll need a training program for all PMO members. Figure out which training program best fits your requirements and which employees need to go through it.
3. Promote the PMO
The last part of the PMO implementation is to promote it to other people in the organization. All employees should know exactly what the PMO is meant to accomplish and how it can benefit them.
Make it known throughout the company's intranet that project leaders, managers, and team members can get help on key issues from the PMO. Also identify key PMO members and how to reach them.
The more you hammer in the benefits of the PMO, the faster you'll gain acceptance for it across the organization.
There is no one-size-fits-all approach to creating a PMO. Every business has different requirements and will need different approaches. Not every business will even benefit from a PMO. Smaller organizations without any formal PM processes will gain more from a project management software implementation than from an expansive PMO.
However, if you already have some maturity in your project management approach and want to bring uniformity across the organization, a PMO would be right for you.
As one CIO puts it:
"If you want to change your culture and the way you do business, put a PMO in place."
In the final section, I’ll share some best practices to ensure the success of your PMO.
PMO Best Practices
Although industry-wide statistics for the impact of a PMO are favorable, there is still wide discrepancy in benefits-realization across organizations.
Much of this is tied to the PMO’s competency and maturity. Research shows that the more mature a PMO is, the greater its impact on the organization’s performance.
Any PMO implementation, therefore, should be focused on improving the PMO’s maturity and addressing the key issues that can cause its failure.
3 Key Challenges to PMO Success
Like any ambitious undertaking, there are a number of issues that can derail a PMO implementation. From demanding stakeholders to delivering results, you’ll have to resolve a number of problems to create a successful PMO:
1. PMO is seen as a cost center, not a profit center
In a survey of PM practitioners, 50% of respondents said that PMO processes are seen as an “overhead” in their organizations.
That is, stakeholders see a PMO as a source of costs, not profits.
This is one of the biggest challenges facing any PMO implementation. Non practitioners often see it as a bureaucratic entity that gets in the way of project delivery. The long-term benefits are either unemphasized or unclear to stakeholders.
2. The organization is resistant to change
A PMO impacts large parts of the business. It brings in transparency where none existed before and standardizes once-haphazard processes. In some cases, it even changes the way entire departments and teams operate.
People are often resistant to these changes. Employees who’ve been with the company for long are already used to doing things a certain way. Asking them to adopt new practices and standards is a significant challenge for any PMO.
3. There is no insight into the performance benefits of a PMO
A lot of the PMO’s goals are subjective. “Standardizing PM practices” is a nice target to have, but how exactly does it improve the day-to-day running of the business?
This is another major challenge for implementing PMOs. Stakeholders often complain that they have no way of measuring the impact of a project management office. In the absence of hard numbers, it can be difficult to underscore its added value.
There are countless other challenges besides these - training PMO members, ensuring consistent application of PM processes, etc.
I’ll share some tips to resolve 6/these issues in the next section.
Best Practices to Improve PM Implementation
To succeed with a PMO implementation, you have to get stakeholders on board and find ways to measure the impact of the office’s initiatives. It also helps if you have executive buy-in and clear alignment with the business’ long-term goals.
Here are a few best practices you can adopt to improve your chances of succeeding with a PMO implementation:
1. Align PMO to strategy
One of the pitfalls of creating a PMO is that you can sometimes focus too much on the "day-to-day" management of projects. This can leave you blind to the long-term strategic goals of the organization. Not only does this impact how stakeholders view the PMO, but also affects the business' ability to prioritize high-value projects.
A solution to this problem is to align your PMO to your organization's long-term strategy. The office should know exactly what goals the business seeks to achieve and what are its growth plans in the near and long-term.
In fact, according to PMI's 2017 Pulse of the Profession survey, high alignment to strategy leads to 38% higher success in meeting project goals.
One way to achieve this alignment is to have an enterprise-wide project management office (EPMO) in addition to the regular PMO. The EPMO can work in tandem with the PMO to get high-level execs on board and keep the project management office in sync with the strategic goals of the business.
2. Make change management a core part of PMO implementation
As I mentioned above, one of the biggest challenges in any PMO deployment is the organization's resistance to change. The project management office can drastically alter the way people work. To make this transition easier, it is crucial that you make change management a core part of the PMO implementation.
Here's how you can do this:
- Focus on top management: If you can win the backing of senior leaders and managers, their reports will usually follow through. Ask senior leaders to also be vocal about the PMO and its mandate.
- Address the "human side": A large change can be a source of anxiety and even hostility, especially if some people feel that their authority might be undercut. Make it a priority to understand the "people issues" in the PMO implementation and address them systematically.
- Emphasize early wins: One way to win over people is to show them that the PMO can deliver real and substantial results. A few big wins early on in the implementation process will go a long way towards reducing doubts and uncertainties.
- Be through with your communication: Make it clear to everyone that the pains of the transition are only temporary. Also ensure that people know the goals of the PMO and where they can get help in projects if they need it.
- Back claims with data: Hard numbers that demonstrate the actual impact of the PMO is the easiest way to win the backing of key stakeholders. Track important KPIs and communicate them clearly.
Speaking of KPIs, let’s look at some important PMO-related KPIs you should keep track of.
3. Track KPIs for your PMO
"How will this actually help us save money or win more clients?"
Questions like these are common when you're creating a PMO. Senior management want to know whether the office will deliver any tangible results or if it is just an exercise in bureaucracy.
To assuage them, you have to create and track KPIs to assess the PMO's performance. This is a crucial task and should be a priority from day-one.
Here are some metrics you can use to track the PMO's performance:
- Ratio of successfully completed projects to all projects
- Estimated projects to actual costs for all projects
- Estimated project duration to actual duration for all projects
- Average stakeholder satisfaction compared to previous reporting period
- Average team member satisfaction compared to previous reporting period
- Time elapsed between project conception to project start
- Time elapsed between project initiation and project completion
- Number of training courses completed by team members compared to previous reporting period
- Number of resources handling multiple projects simultaneously
- Percentage of projects under budget as compared to previous reporting period
- Annual ROI of projects managed and coordinated by the PMO
Not all of these metrics are necessary for every PMO. If your PMO is merely in a supportive role, you might not need to focus on ROI-related metrics.
Besides these hard metrics, it is also a good practice to regularly survey team members and stakeholders. Ask them questions like:
- Are you satisfied with the service of the PMO?
- Does the PMO help you save time?
- Do you find the PMO's methods useful?
- Does the PMO help you resolve resource-related conflicts?
- Do you find the project management documentation and training adequate?
Run these surveys regularly so you have a subjective measure of the PMO's performance.
Creating a PMO is an ambitious endeavor. It has the potential to impact nearly every aspect of your business. A mature PMO can bring transparency and standardization to all projects, radically improving success rate, productivity, and ROI.
To create a PMO, you have to first figure out what model suits your business’ requirements. The next step is to get buy-in from stakeholders and form a core implementation team. Once the PMO is up and running, you have to invest in change management and communicate its mandate clearly to ensure success.
Follow the tips in this guide to start the PMO creation process. Any organization that handles multiple projects at once can benefit greatly from it.
Does your business have a PMO? If yes, what kind of benefits did you realize from it? Share with us in the comments below!