The ROI of PMO
Understanding the essential value of investing in your PMO
Today’s PMO is a chaos wrangler, a master of governance, a resource manager and the linchpin of operational excellence. With all this in mind, is your PMO getting the recognition it deserves as a valuable partner in your organization? The answer to that depends on your perspective, and even more importantly, the perspective of your organization’s executive management team.
In a conference paper titled Establishing the PMO Value Proposition, Craig Letavec of the Project Management Institute notes that PMOs face simultaneous praise and criticism for their work, with some touting their governance, while others view their existence as an “entity that consumes resources.” He continued, “Or, worse, [it is] an “overhead” entity that is viewed as nothing more than a marginal contributor to organizational value.” Although written in 2007, the paper demonstrates the continued struggle that PMOs face to validate themselves as significant contributors and authentic business partners in delivering value to their organization.
However, that is exactly what a PMO is — a partner, a value driver and a worthwhile investment. That’s right. An investment, not an expense. Too often, as noted in Letavec’s write-up, a PMO is viewed as yet another cost to be minimized and curtailed. This is a common mistake that all organizations should look out for and stop if they are making it. Instead, organizations should view their PMO the way that they view the sales department or product development — as an investment that saves and generates far more than it consumes. Read on to learn why your PMO is your best ally in driving organizational excellence.
The Benefits of Your PMO to the Organization
PMO coach and distinguished expert Laura Barnard detailed the many benefits a PMO provides in a recent webinar titled, Driving Organizational Agility: PMO Leaders Rev Your Engines (now available on-demand). She broke down a PMO’s contribution to organizational agility (and ROI) into four categories. A PMO:
- Informs decision making
- Provides portfolio perspective
- Leads organizational change
- Facilitates information distribution
Informed Decision-Making through a Data and Portfolio Perspective
Most budget managers (and executives) want to see numbers to authenticate value: e.g. X action contributed to Y dollars earned or saved. While a PMO cannot necessarily deliver that exact formula, it can provide hard data that will translate into saving or earning those precious dollars. For example, a PMO that utilizes a comprehensive PPM tool can create extensive reporting — hard numbers — that arm decision-makers with information. Here are some examples:
- How many projects have succeeded?
- What sort of revenue is the PM department generating — or losing?
- Are projects completed on time?
- Are they within budget?
- Is resource utilization aligned with your organization’s priorities?
- What are our resource utilization rates?
Data gives the big picture and PMOs cultivate that data from their unique perspective as portfolio experts on the ground and use it to support informed decision making based on strategic objectives.
Sharing Information and Leading Organizational Change through Metrics
Data may tell the broader story, but as they say, the devil is in the details. Fortunately, the effective PMO is all about the details. The answers to the above questions give stakeholders an understanding of the overall operational agility of the organization. The metrics tell them why. Think of it like a visit to the doctor. After extensive testing, the doctor informs you that you have a heart condition caused by a blockage. You have the big picture of your health. However, it is the smaller details that provide a complete understanding of your health — what is your diet? What is your family history? How old are you?
Organizational health operates in much the same way and your PMO plays the role of both diagnostician and historian. The PMO leadership does not just know that several projects have failed or underperformed, they have the metrics to explain why. And this is the big difference in the ability to produce positive ROI.
How does this translate into the kind of benefits that please accounting departments and C-suites alike? Because these metrics can be used to make the necessary changes to create a new story — or, leaning back on the doctor example, create a new plan for improving overall business health. This is, in effect, what your PMO is doing as a driver of organizational agility that achieves solid (and measurable) objectives.
The importance of a PMO to organizational agility and excellence cannot be understated. If your business has always viewed your PMO as an expense instead of an asset, it may be time to start examining how you can reframe your perspective, make the necessary adjustments, and articulate your value to drive success.