Advanced Project Portfolio Management and the PMO

Multiplying ROI at Warp Speed

Gerry Kendall, Steven Rollins

• Publisher: J. Ross Publishing
• Year: 2003
• ISBN:
  9781604277050
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Projektmanagement

Official reference material for the Portfolio Management Professional (PfMP) Credential Examination!This comprehensive book presents a road map for the achievement of high value enterprise strategies and superior project management results. It provides methods for best project selection, faster completion, optimal project portfolio management, and how to explicitly measure the PMO for rapidly increasing project ROI. The Project/Program Management Office (PMO) is the fastest growing concept in project management today and is key to effective implementation of project management across the organization. To keep pace with customer expectations, competition, and economic conditions in the fast-paced global economy, organizations must do more using fewer resources. Advanced Project Portfolio Management and the PMO shows you how to turn your PMO into a value machine.

PART I:

SETTING THE STAGE

FOR A SUCCESSFUL

PMO IMPLEMENTATION

INTRODUCTION —
BUILDING A PMO
THAT EXECUTIVES
EMBRACE

INTRODUCTION

In its ideal form, the Project Management Office (PMO) should represent, for an organization, what air traffic controllers represent to pilots. It should guide projects safely (minimizing the risk) and as quickly as possible to their destination. It should prevent mid-air collisions between projects and resources. It should be the project manager’s and the executive’s best friend.

In our view, the PMO must do even more. It must drive much higher return on the investment that any organization makes in projects. In this sense, it becomes a value machine. To do so, the PMO must be the arm of senior management. It must help the executives meet their strategic goals by providing them with a single point of knowledge for project management intellectual property, among other things. The PMO must help executives execute.

To date, most of the PMO directors with whom we have spoken describe a very different model of their PMO. In a meeting with over 100 PMO directors in Kansas City in 2002, over 90% told us that they have no direct involvement with or expectations from their executives. They also told us to stop preaching to the converted. They know they need executive involvement and support. This book is intended to help.

Most executives would not agree that a PMO is even necessary, unless they fully understand the problems that project and program managers face today. So that is where this book begins.

There are many detailed questions you might have about a PMO. For example, what are the different options for organization structures? Is there a road map that we can follow to successfully implement a PMO? What portfolios of information must a PMO maintain, and what data are included in each portfolio? How do you measure a PMO? What software products are available to support a PMO and how do they compare?

We have included chapters to answer all of these questions and many more. Before exploring the details of the PMO and portfolio management solution, we would like to come to an agreement on what the current problems are in project management common practices. Then the formal definition of the PMO charter, its mission, and deliverables will become much more meaningful.

CURRENT PRACTICES IN PROJECT MANAGEMENT

Some of the practices we see in project management are nothing less than bizarre. By analogy, it is like doctors scheduling surgery in a hospital, regardless of whether or not the operating room is available. Imagine having 10 doctors show up on the same morning, all with prepped patients. No one person “owns” the operating room schedule. The operating room support staff report to different supervisors.

The supervisor decides that she doesn’t want to have any surgeon be mad at her, so she instructs the operating room staff to multitask in order to assist all surgeons in the operating room. All surgeons will have access to the precious resource, the operating room table, and the one anesthesiologist and the one surgical assistant, but only for 15 minutes at a time.

Surgeon #1 begins surgery, but must relinquish the table to Surgeon #2 after 15 minutes. Surgeon #2 must relinquish to Surgeon #3 after 15 minutes, etc. Surgeon #1, who could perform his surgery in 1 hour dedicated time, is now stuck for 10 to 15 hours, trying to keep the patient stable. Each time a surgeon is given the precious resource, the operating room table, he struggles to remember how far along he had gotten in his last 15-minute slot, several hours earlier. Fifty percent of the 15-minute time slot is wasted just in getting restarted.

If this already sounds ridiculous, good! We are just scratching the surface of how projects are actually managed in organizations today.

The surgeons cannot afford to waste their time. They are a precious resource. So, in between their 15-minute time slots, they rush out of the operating room to do other important tasks. Sometimes, they become so preoccupied with another task, they do not even make it back to the operating room in time and miss their surgical slot completely. The surgery takes even longer. The surgeons also waste half their time going to and from the operating room, switching tasks.

Senior management of the hospital comes under pressure. They paid a lot of money to build the hospital. The operating rooms are the most precious resource of the hospital. The flow of patients through the hospital, and through the operating rooms, determines how much money will flow through the hospital. And the flow of patients is dreadfully short of what is needed to keep the hospital afloat.

The hospital is being squeezed by insurance companies, HMOs, etc. who are all demanding to pay less money for the same procedure. Senior management cannot hire more surgeons and cannot build more operating rooms.

Reports to senior management make everything seem wonderful, when, in fact, the financial situation is getting worse and worse. The hospital sets up a Surgery Management Office (SMO), to gather information and help patient flow. The first thing the SMO does is demand that everyone fills out detailed time sheets to help ensure full utilization of all resources. Various reports claim that the operating rooms and the surgeons are almost 100% utilized. Yet the revenue flow is decreasing. How can this be? While it is true that the operating rooms are heavily utilized on paper, the truth is that half of the utilization is bad multitasking, moving patients on and off the operating room tables. This activity generates no revenue. The SMO reports are not helpful in pointing out this flaw.

To increase revenues, senior management instructs the surgeons to initiate more surgeries per month. Their false belief is that if they initiate more surgeries, they will complete more surgeries. Another false belief is that if all resources are busy doing important work, then the organization’s goals will be met.

Faithfully, the surgeons obey and the following month the picture is worse. Fewer surgeries are completed. Rework is increasing. Scrap (a bad word in a hospital) is increasing. The surgeons are complaining constantly that they are having fights with each other over the allocation of the operating room.

Senior management listens but would really like their staff to solve these problems themselves. Aren’t they adults? Can’t they get along with each other? Why do we, senior management, have to constantly be the referees?

The pressure increases and the executives declare that cost is too high. Procedures are taking too long. Surgeons are allocating too much time to each procedure. Supporting resource time is too high. Much of the focus is on cost and cost reduction. Schedules and budgets are cut across the board.

The following month, the executives are extremely unhappy, but are having great frustration in deciding what action to take. The surgeons did drive down the average cost and time per procedure. There was an average 1.5% cost reduction and a 3% time reduction per procedure. Yet the total operating expenses of the hospital did not change one penny. No surgeons or staff quit or were fired. The depreciation expenses of the hospital did not change. The revenues of the hospital did not get any better. In fact, they decreased.

The surgeons used the distortions of cost accounting to make the reports look favorable. Even though the time allocated by surgeons on their time sheets to the actual surgery was decreased, the hospital is still paying them the same salary. So the hospital expenses did not change.

The hospital is now in a crisis. Senior management decides they must take control of the details. They jump in and refocus the SMO to help prioritize surgical schedules, so that the most lucrative surgeries have access to the precious resource — the operating room table — for a full two hours at a time. Finally, some surgical procedures are flowing nicely to completion. The cash flow crunch is over. Senior management breathes a sigh of relief and moves on to “more important tasks.” Within a few weeks, the situation has deteriorated again, and senior management must intervene.

The refocusing of the SMO helped to alleviate the symptoms of the problem, but did not get rid of the disease, the root problem. Without executive support and new SMO procedures, the surgeons’ behavior reverts back to scheduling surgeries, regardless of the capacity of the system to handle it.

THE CURRENT PARADIGM

We claim that in most organizations, projects are managed this way. New projects are initiated by functional executives, irrespective of the resources available to perform the projects. Senior executives do this because they feel they have no choice. Their project is vital to their success, and, in some cases, to their survival. The project must be initiated. What better time is there to initiate it than right now?

Projects are initiated without collaboration and coordination between functional executives. Where an organization, realistically, has the shared resources to focus on a few initiatives and get them accomplished quickly, we find most organizations foc...