Cutter Consortium
21 August 2007

The PMO: Delivering Business Value

by Bob Benson and Tom Bugnitz, Senior Consultants, Cutter Consortium

Today's Cutter Edge is excerpted from Cutter's Business-IT Strategies advisory service. For more information, please contact Dennis Crowley at +1 781 641 5125 or e-mail dcrowley@cutter.com

We have been working with clients on establishing the project management office (PMO) function and pointing the PMO in the right direction. We have also been making presentations at conferences and at companies on this subject. Two questions often are asked: is the PMO important to achieving business value with projects, and what exactly is the charter for the PMO? Our answers are simple: the PMO is on the front lines of business value, and it plays a critical role in its achievement.

The PMO Role

Fundamentally, the role of the PMO is to ensure that every project delivers business value. This may sound simplistic, and may be thought to overlook other possible roles such as managing the project portfolio, tracking projects as to on time and on budget, and monitoring risks to successful project completion. While these are critical, they are subordinate to the more fundamental issue, which is delivered business value.

What Is Required of the PMO?

In our view, the PMO must focus on two basic things. First, obviously, that every project in fact defines exactly how it will produce business value. Note that this isn't the same as the project's ROI, because ROI is useless for most projects. ROI does very little to accurately judge how a project supports the business' strategic intentions; in fact, it probably badly misstates this support. In addition, no one in management actually believes the ROI figures produced for IT projects. Second, the PMO must focus on getting management's attention and involvement in the processes of reviewing, prioritizing, approving, and monitoring the achievement of business value by projects.

What Is the PMO's Charter?

The basic charter for the PMO is in the following four parts:

  1. Establish a comprehensive project management reporting capability for the entire portfolio of projects. This addresses both basic points -- by reporting on the likelihood of achieving business value and providing transparency into costs, schedule, scope, technical risks, business risks of projects -- management can be engaged.

  2. Ensure the business value of every project in the portfolio is defined and achieved. The key word here is "defined." As the PMO establishes the SDLC or agile process, and as projects go through it, the key accomplishment is getting a definition of exactly how the project will produce business value. This entails defining the business strategic intentions that will be supported, and exactly how they will be supported.

  3. Provide business and technical management with a complete business-value view of all projects throughout the life cycle. This is the portfolio management aspect of the PMO's work. By reporting on the portfolio and by providing insight into the risks and hurdles to the successful achievement of business value, the PMO can trigger management attention and mitigation planning for those projects failing the goals. Note that this can include management attention to the traditional issues of project management -- namely scope, schedule, and cost -- but these issues are subordinate to the fundamental ones: will each project actually produce value, and which projects are in trouble and need attention? Note that managing prioritization and project approval processes falls into this category.

  4. Focus on the achievement of business impact and benefits. This goes to the heart of the PMO's responsibilities. Project risks such as the lack of change management, the lack of business process change, and the lack of management support for transitioning to the project, are all core to what the PMO should be focused on.

The tendency in companies can be to focus the PMO on issues of project management, the traditional aspects of the SDLC or agile methodologies, and developing the capabilities of project managers. These are important but should not overshadow the critical contributions PMOs can really make: successfully delivering business value from the entire project portfolio.

We welcome your comments on this issue of the Cutter Edge and encourage you to send your insights on the market in general to us at BBenson@cutter.com.

Sincerely,
Bob Benson and Tom Bugnitz, Senior Consultants
Business-IT Strategies Practice
E-mail: bbenson@cutter.com

The PMO: Delivering Business Value