Chapter 13
The Program Management Office
The formation and use of a program management office (PMO) is a natural progression as a program-oriented organization continues to grow and mature in abilities and practices. The PMO addresses three of the most common problems that arise as the use of program management increases within an organization. First is the realization of the need for applying uniform program governance and other standards for all programs within a business. Second, the PMO drives consistency and commonality in the use of program management practices, process, tools, and metrics to drive more predictable and repeatable results. Finally is the need for a single focal point for the program management responsibility and accountability within the organization. The PMO leader becomes the individual accountable for overseeing that programs achieve the organization's business results and benefits.
The PMO provides leadership and infrastructure for managing and controlling multiple programs. It represents a compilation of program management infrastructure, tools, and best practices that have been melded together to improve business results and drive continual gains in a firm's program management effectiveness.
Roger Lundberg, former PMO director of the Jeep division at DaimlerChrysler, had the following to say about implementation of program management:
Successful implementation of program management within an organization requires a certain amount of infrastructure. Key elements of that infrastructure include a good portfolio management process, a well-defined and executed development process, a good requirements system, and good processes such as resource management, change management, decision-making, budgeting, scheduling, and financial target-setting.
An effective PMO provides the right level of program management infrastructure and aligns it with the overall company culture and structure.
This chapter focuses on the role the PMO plays in establishing program management as a functional discipline within an organization. The description of the program management office, its primary functions, and operational elements are discussed. Additionally, PMO implementation guidelines and a variety of organizational factors worth considering when a management team is evaluating the formation of a program management office are presented.
Characterizing and Defining the PMO
So what is a program management office and how does it differ from a project management office?
The PMO is a centralized unit, division, or body of professionals within an organization that is responsible for instilling structured leadership, methodology, and practices for programs to make the best use of a company's time, money, and human resources (see “PMO: A New Idea?”). One of the key purposes of the PMO is to ensure that a firm's programs are consistently adhering to the established corporate governance policies, processes, and procedures. The objective of the PMO is to promote and drive consistent and repeatable program management practices within an organization. More specifically, it is a central function utilized for simultaneous management of multiple programs.
The program management office differs from the more common project management office in at least two ways.1 First, the program management office is focused on consistency of methods, tools, and practices for all programs within an organization, as well as consistency of methods, tools, and practices for all projects that make up a program. Therefore, the program management office encompasses both program and project management practices.
Second, the program management office is focused on both business and operational success, whereas project offices are primarily focused on operational success. The PMO is responsible for defining and measuring program metrics that measure progress relative to business goals and ensuring each program supports and is helping to achieve the strategic goals of the company.
In essence, a PMO establishes a formal management function. It provides a true departmental home for the program management discipline within an enterprise. This is similar to other organizational disciplines such as human resources, information systems and technology (IT), marketing, and engineering. Each is a functional discipline, unit, or division with the organization and services the entire enterprise.
To be sure, some organizations have established project offices and program offices within other departments of the organization (usually within engineering, IT, or marketing). The inherent functional bias that exists when program managers report into a functional discipline such as engineering or marketing is eliminated when the PMO is established as a peer organization to the others. The PMO provides an established formal path for escalation of issues, barriers, and unresolved risks to senior management for appropriate assistance in resolution. It also facilitates the sharing of knowledge and learning for the organization's program managers.
Program management offices are used in a wide array of organizations and industries for coordinating various types of programs. It can manifest itself in a variation of implementations ranging from an informal community of practice to a comprehensive, business enterprise-level program management office. The appropriate implementation of the PMO is unique and will be dependent upon the objectives, complexity, and culture of the specific firm. Normally, a robust PMO is more useful and cost-effective for larger firms and is especially beneficial for companies with geographically distributed sites and teams.2 Smaller, single-site organizations, or those with a limited number of programs may not warrant the need for a comprehensive PMO. In these organizations we commonly see either an informal PMO in the form of a community of practice, or an individual serving as the PMO leader.
In addition to knowing what a PMO is, it is equally important to know what a PMO is not. It is not a cure-all for poor business strategy and it will not substitute for a lack of portfolio planning. Likewise, it is not a strategic planning function for a business unit or a company. Even though it can be formalized within the organization, its structure and use does not have to be rigid or inflexible. It often is not as effective in a decentralized organization, and it is not a panacea that will solve all the problems that exist within an organization.
PMO Options
The impetus for the creation of a PMO most often originates out of the need for continual improvement in achievement of business objectives and is often driven by major change within the organization. This could be fueled by such things as a firm's rapid growth, mergers and acquisitions, or re-location of operations to multiple sites, to name a few. Changes such as these can result in a greater number of programs, larger programs, increased complexity due to design and team structure, and co-development of new solutions involving multiple geographical sites. These changes, although strategically important to the firm, may create challenges and barriers to achievement of business goals due to inconsistency in program performance; poor communication among project teams, program managers, and key stakeholders; variability in program measurement techniques; and the lack of central coordination of all programs within an organization.
These challenges become even greater as growth occurs internationally, adding language, cultural, and time zone barriers. If these challenges and barriers are not properly addressed, they may result in a firm's inability to manage and control development efforts, leading to adverse impacts on business results due to missed schedules, program cost overruns, customer dissatisfaction, and competitor gains.
Understanding the type of PMO that is needed is an important aspect of establishing and growing the program management discipline in a firm. Simply stated, the PMO type must align with the current maturity level of a firm's program management capability and have the capability to lead the organization's program managers to a higher level of maturity and performance. This alignment of PMO type to a firm's program management capability is illustrated in Figure 13.1, where we demonstrate the use of the program management continuum to guide the type of program or project management office to implement.
Figure 13.1 Aligning PMO type to organizational need.
Understanding how program management is implemented within an organization leads to the type of PMO needed. Project-oriented organizations will typically range from seeing no need for a centralized function to guide project governance and standards all the way up to a formalized project management office. These project management offices primarily focus on the operational needs of their projects and programs, and ensure that policies, standards, and tools are being followed. On a more informal basis, project managers in some organizations will group together on their own to form communities of practice in order to share best practices, use of tools, and other means to seek continual improvement in the performance of their roles.
A program-orientation means that an organization has philosophically accepted the importance and need for the use of program management as one of the means for achieving their business benefits. In many cases, firms also adopt a PMO approach as a tool for implementing continual improvement to see further gains in alignment of programs to business strategy. These PMOs may range from a functional program office, a business unit-specific program office, or a company-wide enterprise PMO addressing the program needs from the corporate level.
The Project Control Office
The project control office is normally established to provide administrative and tracking support for project teams. Generally, these are independent projects and not integrated nor reliant upon one another for deliverables. In other words, these projects are not part of a broader program.
Work in the project control office is focused primarily on maintaining project procedures, schedule maintenance, earned value tracking, tool usage and support, and project metrics and report generation.
The Functional Program Office
The functional program office is established to support the program managers within a single department, but does not operate as a service or function for an entire business unit or company. Rather, it normally supports a single function such as IT, and is more administrative than strategic in nature. The operations of the functional program office focus on maintenance of program schedules, program and project data tracking, and development of program indicators and reports. The functional program office also maintains a central repository of program and project information pertaining to the particular function in which it operates.
The Business Unit or Enterprise PMO
According to some experts, the establishment and use of an enterprise PMO is a measure of organizational maturity, where program management is recognized as a true function within the company.3 The key difference between a business unit PMO and an enterprise PMO is span and control. Depending upon the needs of the organization, senior management may choose to focus the PMO on a specific business unit or division within the company, while in other firms there may be a need to focus the PMO at the corporate or enterprise level. Both PMO types, however, are a part of the business engine of the company (Chapter 3).
A business unit or enterprise PMO is the center for program management competencies and practices within a company. It should be established at a level within the organization comparable to other critical functions. Placing the PMO high in the organization hierarchy is critical for two reasons. First, the PMO leader needs to be part of the senior management team of the organization in order to properly align programs to business strategy. Second, the PMO leader must have sufficient political and decision-making influence to manage conflicts and other tensions between various functional disciplines. The business unit or enterprise PMO is normally led by a manager or director who is responsible for all aspects of the program management discipline for the company.
Companies that perform much of their work in a distributed or virtual environment that spans multiple sites and geographies derive a tremendous benefit from the leadership, monitoring, and control offered by a business unit or enterprise PMO. It provides continuity for the portions of a company that are located in geographies far removed from the main offices of the firm that may be experiencing difficulty effectively linking work activities and results with business strategy and staying consistent with requirements established by the home office of the corporation.
An effective business unit or enterprise PMO can have significant influence throughout the company. Figure 13.2 illustrates how it can be used to influence critical aspects of a business' operation such as building a stronger program link to strategy, building program management maturity, forging strong relationships between the program managers and the functional and senior managers of the business, and establishing commonality in program management practices, processes, metrics, and tools.
Figure 13.2 PMO organizational influences.
Adding Value to the Enterprise
Figure 13.1 illustrates that the amount of influence a project or program office has on business operations is dependent upon the type of office that an organization chooses to implement, with the greatest level of influence and resulting business value coming from an enterprise-level PMO. The following is a description of the value proposition firms have realized by implementing an effective program management office.
Repeatable Business Results
As stated in the PMI Standard for Program Management (3rd edition), “establishing an appropriate collaborative relationship between individuals responsible for program governance and program management is critical to the success of programs in delivering the benefits desired by the organizations.”4 In many firms, the program governance accountability becomes one of the key responsibilities of a PMO, and program governance is focused on delivery of business results in a repeatable manner. Business managers need a level of confidence that when they turn their investment of money, resources, and time over to their program managers, the program managers will manage that investment in a predictable manner (and that they will do so repeatedly over time). The PMO provides the infrastructure and governance to provide the necessary predictability and repeatability.
Execution of Business Strategy
We have discussed repeatedly throughout the book the value of a proficient program manager in achieving the successful execution of a firm's business strategic goals represented in specific programs. This must be a critical driver at the PMO level as well. The PMO must always be aligned with the business strategy of the organization and quickly become in sync whenever it changes. Keeping in sync means constant review of program work relative to its business case, modifying program objectives and work efforts if needed, and program termination in some cases. The use of a PMO can further increase this capability and focus by tightening this linkage between strategy and execution through continual improvement and to carry some of the portfolio management responsibilities for the firm.
Business Risk Mitigation
Informed risk taking is the goal of effective risk management. Significant unmanaged risks can lead to substantial loss or missed opportunities for the organization. Direct involvement by the PMO helps ensure that program managers are fully informed of and engaged in managing the business risks associated with their program, and can take the necessary actions with their team and within their span of control to properly address and manage them.
Management of Complexity
The elements and changing landscape of complexity in today's business environment was discussed in detail in Chapter 4. One of the most significant complexities is managing the geographically dispersed team environment due to the distance, cultural, and communication barriers to name a few. Many companies have made significant gains by applying their PMO capabilities to resolving these challenges. The ability to apply the program management skill and expertise uniformly across all programs, regardless of geographical location and level of complexity, creates a level of synergy that is difficult to replicate by each program team working independently.
Establish Program Management Excellence
Organizations that are program-oriented will many times establish a PMO as a center of excellence for the program management function. These firms will seek, either internal or external to the organization, a qualified individual to lead the PMO who possesses substantial program management experience and demonstrable knowledge and understanding of program management methods, processes, and tools. Normally, program managers within the organization will have ongoing accountability to the leader of the PMO for their performance on their programs pertaining to leadership and program management expertise. The PMO provides momentum for continued improvement in program management practices.
Key Responsibilities of the PMO
Regardless of its structure, the PMO is the central function for the program management discipline within a business. In its fully developed state, it should contain all elements necessary to ensure that programs are managed effectively and efficiently. If these elements are centrally managed, coordinated, and integrated into a systemized approach, it provides for unified coordination and control while simultaneously enhancing communication across all organizations, functions, physical sites, and time zones. Figure 13.3 illustrates the eight key aspects of an effective PMO.5
Figure 13.3 Responsibilities of a PMO.
Program Management Organization
A PMO needs to be established as a true function within an organization and have a well-defined structure with clear roles and responsibilities communicated across the firm. This is especially critical for larger organizations that have numerous program managers. We discussed the need for empowerment of program management by senior management in Chapter 11, which implies that in establishing a PMO for the firm, senior management is empowering it and supporting it to operate as chartered. This support should be formally communicated throughout the organization and senior managers need to be visible in their support of the PMO and program management processes. One of the important roles of the PMO leader is to develop and administer a career ladder for the growth and advancement of program managers within the firm. The career ladder should include detailed job descriptions outlining responsibilities and experience levels that range from entry-level to senior-level positions. These can be used for hiring, setting performance expectations, promotion, and other professional needs.
Operational Management
Many PMOs provide operational and administrative assistance to the program managers in the organization. This may involve coaching and assistance on utilizing various program methods, processes, and tools as required. The PMO also provides consultation and mentoring for sensitive issues and problems, program start-up and closure activities, as well as a structured process for the escalation of issues and problems. The PMO leader will also be required to interface with senior management, functional management, and other stakeholders within the organization relative to program management and other operational barriers and issues that surface on an ongoing basis as multiple programs are underway.
Governance
Governance, as stated earlier in the chapter, is one of the important responsibilities of the PMO. At the business or enterprise level, governance of programs is absolutely critical. Programs require a more complex governing structure than projects because they involve fundamental business changes and expenditures with significant bottom-line impact. In some instances their outcomes may determine whether the enterprise will survive as a viable business entity.6 The PMO leader needs to work closely with the designated personnel in the firm responsible for establishing, managing, and administering the corporate governance processes and requirements.
Program Information System
The PMO should be the focal point for program management information and knowledge management within an organization. Centralized storage and organization of program information improves accessibility of the information for the broader organization. Program information includes historical data on program performance to business results, risks, issues and problems encountered, and best practices employed on previous programs. This central repository also allows the opportunity for wide distribution of program retrospective information collected to enhance communication of key lessons learned.
The program knowledge base should include a repository of the common methodologies and tools to be employed on all programs. This includes templates, checklists, and instructional material. Additionally, research, development, and innovation of new methodologies, processes, tools, and technologies are driven by the program management office.
Methods, Processes, and Tools
A primary objective of the PMO is to promote consistent and repeatable program management practices that result in efficient use of business resources. This is accomplished in large part through the development and use of common methodologies and processes. For example, all programs should be managed via a common life cycle methodology as well as consistent scheduling, risk management, change management, and requirements management methods and processes (Chapter 7). These should be common across all sites and geographies to improve coordination and communication to achieve improved predictability of performance on all programs, more effective decision making, economies of scale with respect to infrastructure and tool deployment, and increased flexibility of resources from program to program.
The PMO is responsible for evaluating, selecting, deploying, and many times maintaining the tools that are implemented by the program teams (Chapter 9). This also includes training and mentoring on the effective use of the tools. Like program methodologies and procedures, the PMO looks to drive commonality of tool deployment and use across all programs within an organization. This increases economies of scale to support, use, and maintain the suite of tools.
Metrics and Tracking
The PMO is responsible for developing and maintaining metrics that accurately measure program progress and reflect the achievement of the business goals intended (Chapter 8). This includes trending of the information as needed and publishing the results of the information to the appropriate audiences. The PMO also tracks, collects, and analyzes the data necessary for the development of the metrics through common program tracking tools. New tools are consistently being developed to more adequately monitor and track progress of programs within the simultaneous, multi-program environment. The role of the program management office is to consistently develop the appropriate measures and metrics so the tools provide improved data collection and information dissemination.
Management Reviews and Reporting
The PMO may be responsible for orchestrating and running the formal program reviews for senior management. This includes defining the format of the meetings, the agendas, and the attendees. The PMO provides for an organized and structured approach for management visibility of programs underway in the firm. The structure of management reviews, information to be presented, and who attends the meetings should be negotiated between the PMO leader and other senior managers. The PMO is then responsible for scheduling and leading the reviews and capturing decisions reached and actions needed from the meeting. The focus of these reviews is to determine the status of the programs toward achieving their business objectives.
Competency Development
The program management discipline will only be as effective as the program manager's skills, capabilities, and experience. Skills training and development can and should be made available to all program managers, and be part of the PMO charter. Much of the training material can be maintained on websites and available to all personnel, and can include online modules as well as face-to-face group sessions and forums addressing specific topics. For multi-site firms, training and best practices for managing in a distributed or virtual team environment can be provided. Training and career development of the program managers in the organization is driven and supported by a program management competency model as discussed in Chapter 11.
The PMO is responsible for creating a learning environment through the alignment of all program managers and their teams under the same leadership, philosophies, and practices. Program managers master their skills as they communicate and coordinate their programs with other program managers in this structure and, therefore, are continually observing and learning from one another.
The PMO Leader
It is not too surprising that when one envisions the role of a program manager as difficult, they also view the role of a PMO leader is an order of magnitude more challenging. PMO leadership is a critical role in a program-oriented company. As was stated by Lia Tjahjana, Paul Dwyer, and Mohsin Habib in their book, Program Management Office Advantage, “an organization's success in operating a PMO depends primarily on the competencies and performance of its staff and most specifically on the hard and soft skills of the PMO leader.”7 The case study provided in Appendix A (“I AM the PMO”) provides a good sense as to how a PMO can be an integral part of a corporation and how establishing this role can be so challenging.
The role of a business unit or enterprise PMO leader can carry a wide array of responsibilities, ranging from management of the program managers and related governance, processes, methods, and tools, to ultimately being responsible for the business results of all programs for a business unit or enterprise. The specifics of a PMO leader's responsibility will depend upon how senior management charters the role.
The role has many elements of a functional manager responsible for driving excellence in the program management discipline and is focused on consistency of program management performance within the organization. Key responsibilities of the PMO leader are shown in Table 13.1.
Table 13.1 PMO leader responsibilities
| PMO Leader Responsibilities | |
| Be directly involved in the hiring and performance reviews of program managers within the organization | Assist the program managers, when necessary, in achievement of their program objectives |
| Provide direction, coaching, and support to program managers and their respective teams | Provide training and development as well as advice on career development planning for the organization's program managers |
| Provide the tools and infrastructure necessary for program managers to do their jobs | Organize and lead program reviews for the program managers with senior management |
| Ensure program teams are adhering to all governance and other corporate policies and procedures | Make course correction and adjustments to programs which are missing planned targets |
| Disseminate periodic program status reports and metrics to senior management and other vested stakeholders | Create roadmap and plan for continual program management growth and maturity |
A strong PMO leader is a person who has successfully led individuals in achieving consistent performance results, and possesses strong interpersonal skills, including the ability to interact and communicate successfully with personnel and management at all levels within the organization.
Listed in Table 13.2 are some of the critical knowledge, abilities, and personal attributes that the PMO leader should possess. It is important to note that the competencies discussed under the program management competency model (Chapter 11), are considered as the basic skills needed for the PMO leader.
Table 13.2 PMO leader knowledge, abilities, and personal attributes
| PMO Leader Knowledge, Abilities, and Personal Attributes | |
| Knowledge | Working knowledge and experience with all program management methods and tools Thorough knowledge and ability to apply corporate governance and other required policies, procedures and standards General knowledge of the industry and the markets served by the organization |
| Abilities | Ability to apply solid business practices to corporate strategic and business requirements and relate these to program business results Capable of acquiring organizational respect and be recognized as a leader in the discipline of program management Capable of driving and providing the leadership for achieving the long-term viability of program management and the PMO entity within the firm Ability to negotiate and drive to resolution barriers and issues related to and impacting the program management discipline within the organization Ability to establish cross-industry network to continually look for best practices and tools to adopt Experience with market and customer assessment and validation tools for evaluating potential new opportunities Ability to stay abreast of changes and trends within the markets served Ability to build and sustain positive working relationships Capable of managing multiple, simultaneous responsibilities successfully |
| Personal attributes | Highly motivated and a self-starter Goal-oriented High degree of perseverance and tenacity Confident in one's ability to lead Courage to confront personnel as needed and appropriate at all levels of the organization in a professional manner Positive and upbeat Honors commitments Astute at finding ways to get things done with the ability to innovate when necessary |
As it is with program managers, it is a rare individual who comes to the job of PMO leader fully qualified for the role. Normally, organizations seek to hire the best qualified individual available and then grow them into the role. It must be kept in mind that becoming totally proficient as a PMO leader is a journey. Given the continual changes in the business environment and program environment, and the need for new methods, processes and tools, we are all on a journey to improve our skills and capabilities.
Measuring PMO Effectiveness
One of the primary challenges facing a PMO leader is to measure and communicate the effectiveness of their PMO. Unlike individual programs which have access to established metrics to measure performance and effectiveness, PMO-level metrics and measures are not well established. Additionally, measuring both business effectiveness and operational effectiveness can be a complex undertaking. In general, PMO-level measures and metrics must focus on the aggregation and consolidation of the program-level measures and metrics to provide a higher level assessment of organizational effectiveness.
Project offices and functional program management offices are primarily focused on operational effectiveness. Therefore, measures and metrics for these PMOs should generally be focused on operational factors such as adherence to processes, performance to schedule and cost, and predictability of project output delivery.
Business unit and enterprise PMOs are primarily focused on business effectiveness and therefore must be assessed on the combined business results of all programs within the organization over a specified period of time, as well as appropriate operational factors. Some firms have found that the assessment is helped by utilizing moving average metrics in order to normalize for variations based on time frame.
Table 13.3 provides a number of measures and metrics for evaluating effectiveness of business unit and enterprise PMOs.
Table 13.3 PMO Effectiveness measures and metrics
| Measure | Description | Evaluation Method | Metric |
| Time-to-market (time-to-go live) | Program outputs released on schedule | Moving average percentage | Number of program outputs released on time, divided by total number of programs completed |
| Profit margin | Profit margin performance post release | Rolling four quarter moving average | Average profit margin one year after program output release |
| Profitability index | Profitability index performance post release | Rolling four quarter moving average | Average profitability index one year after program output release |
| Investment performance | Management of program investment | Quarterly moving average | Total budget spent for all programs versus planned investment spend |
| Cycle time | Improvement in program cycle time | Quarterly moving average | Average cycle time from solution concept to program output release |
| Program stability | Adherence to program strike zone target and threshold boundary conditions | Point calculation typically performed yearly | Number of programs hitting a Strike Zone “red condition” (senior management intervention required) |
Each PMO leader should discuss and come to agreement with their senior management team as to what the formal measures and metric should be to evaluate the effectiveness and continual improvement of their PMO. A focused effort is necessary to ensure that the metrics fit the needs of the business and avoid any overlap and redundancy with other metrics and measures used within the organization.
The Future of the PMO
There is evidence to believe that the future of the PMO looks bright. Although there are cases of both success and failure, much has been published regarding the value and benefit of effective PMOs. They have been well recognized in industry standards and are visible in every industry sector of work. It is important to note, however, that there is a strong correlation between how long a PMO has operated in an organization and its success rate.8
Literature tells us that the primary reasons for establishing PMOs tend to center around improving project and program success rates, and the implementation of standardized procedures, both operational reasons. Our personal experiences show that organizations are also turning to PMOs to help achieve repeatable business results, by establishing better alignment between execution output and strategic intent, improving management of business risk and complexity, and building world-class program management competence. One senior executive we spoke with praised the role of the PMO within his organization:
Program management is designed to successfully execute cross-organizational collaboration for achievement of business objectives, and the best organizational entity to manage the multitude of activities and ensure effective governance of program progress is the program management office.
Of course, this does not mean that there are not challenges to overcome. Perceptions regarding the value of PMO's are a significant problem. Additionally, establishing a PMO, or increasing the span and influence of a PMO, modifies the existing power structure and roles and responsibilities within an enterprise which breeds resistance to change. Finally, it is probably rare that a PMO leader does not experience the perception somewhere in the broader organization that a PMO is a natural breeding ground for bureaucracy when creating and implementing new policies and standards that the organization needs to abide by.
Despite these challenges, we clearly see that implementation of PMOs is again on the rise. The difference today is that the PMOs are trending more toward being lean, more focused, and better positioned within organizations. This is further reinforced in the PMI's 2013 report titled, “The Impact of PMOs on Strategy Implementation”:
A PMO with a broader business-wide responsibility, such as an enterprise-wide PMO is closest to delivering business value because it is more likely to routinely help in aligning development outcomes to strategic priorities.9
Whether a PMO is staffed by a single individual or a multitude of individuals, it remains an innovative approach for providing leadership, infrastructure, and governance for managing and controlling multiple programs within an enterprise. It provides the ability to successfully manage and coordinate scarce resources, consistently track program and project progress, ensure that deliverables are completed correctly and, when planned, that senior leaders receive relevant and consistent information to enable good decision making, and that a firm achieves its desired business results—it's about the business.