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Project Management Offices: A Waste Of Money?

The risks of starting a PMO have never been greater, new research shows. After years of observing project management, I agree.

8 CEOs Speak: IT Projects That Matter Most
8 CEOs Speak: IT Projects That Matter Most
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Will most companies that implement a project management office take on higher IT costs without improving performance?

That's the bold headline of a Hackett Group study of more than 200 organizations. It's not just hype: I happen to agree that the risks of a disastrous PMO implementation have never been greater.

Don't get me wrong: PMOs can be incredibly valuable when they manage the right projects through to business-focused completion and kill the projects that don't measure up. Trouble is, PMOs aren't right for every organization, and every organization won't match the intent with the follow-through. Creating a PMO under the wrong circumstances is likely to produce nothing but more project overhead.

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Hackett Group, an operations improvement firm, found that PMO use for companies of every stripe grew from 2007 through 2009 but steadily declined thereafter. Its research backed up some of the findings in InformationWeek's 2012 Enterprise Project Management survey, which also traced a reduction in PMOs and formal PMO skill sets over time.

The Hackett bombshell: In some cases, the IT organization's performance actually improved once the PMO was eliminated.

Hackett also found that more PMO oversight doesn't necessarily improve business results. "In a weak PMO, poor management of time, resources, requirements or customer expectations encourages shortcuts that increase design weaknesses that drive higher maintenance and support costs," the Hackett report concludes. "Failure to properly identify and manage risk associated with poor technical decisions can also lead to complexity. Even the selection of projects for the portfolio can influence complexity if the PMO does not understand the long-term tradeoffs associated with certain kinds of technically risky projects."

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Many of the PMOs of poorer-performing organizations have employees with Project Management Institute and other formal certifications, Hackett found. The problem is that those employees often lack a working knowledge of the business or its technology infrastructure, and their main functions are as task-list keepers and process cops. Most of us wouldn't want to provision a whole business unit full of those kinds of people, yet I've seen it happen, mostly because management doesn't want to pay extra for business leadership.

In successful organizations, Hackett found four key practices: Centralized IT demand management, accountability for business benefits, standardization of processes and architecture, and program and project reviews. OK, let's translate that consultant speak into English. Their PMOs work with business units to review and set priorities for the IT services they use. They're responsible for results, not allowed to point fingers and say: "Well, you didn't listen to me!" They revisit projects after they're completed to assess lessons and adjust practices.

Yet those key practices might still not be enough to justify a PMO. In some cases, Hackett says, agile development and collaboration methodologies such as Scrum can eliminate the need for heavyweight PMOs.

I don't think the PMO is dead, but given the research findings and my own experiences, proceed with caution. Watch out for career builders who prioritize padding their resumes ("I built a PMO!") over delivering organizational benefits. Be minimalist: Anything that gets implemented should have a plain-English reason.

Above all, ensure that the executive team is committed to the PMO. After many years of observing projects and project management, I know this: A PMO that gets just lip service from the C suite won't get the resources or executive attention it needs to succeed. The PMO will then linger on, both for project managers and the business units it's inflicted upon, for year after year before it's put out of its misery. Bottom line: while the benefits are there, the risks have never been greater.

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User Rank: Author
11/8/2012 | 7:26:53 PM
re: Project Management Offices: A Waste Of Money?
I'm surprised speed -- or rather slowing down the process -- isn't cited as a risk, Jonathan. a lot of times I hear agile methodology brought into the picture, it's because the existing system of requirements and reviews is too slow. Or it can't accommodate a reality in which the full specs aren't clear until the development begins -- iterative development of a new product, with IT and product marketing and product engineering teams in one group.
User Rank: Strategist
11/9/2012 | 1:01:38 PM
re: Project Management Offices: A Waste Of Money?
Chris, absolutely, speed is a component, I think that's the problem with having task keepers who aren't business savvy: you end up with process that may or may not be necessary. Few of us would say that a business-necessary process is a waste of time or a slowdown; but most of us would say that a process without a point is a waste of time.
Heather Vallis
Heather Vallis,
User Rank: Apprentice
11/9/2012 | 7:59:02 PM
re: Project Management Offices: A Waste Of Money?
To further illustrate findings from the Hackett Group, InformationWeek's recent Enterprise Project Management Survey showed a nine-point decrease in the percentage of organizations with a PMO compared with 2010 (60% vs. 69%). Furthermore, the percentage using formal project management methodologies dropped from 70% to 58%.

Heather Vallis
Managing Editor, Research
User Rank: Apprentice
11/9/2012 | 8:11:09 PM
re: Project Management Offices: A Waste Of Money?
Great column. At its worst PMOs become another silo of activity not connected to business reality. I've seen project management software that is more complicated than the project being managed. Tying project management to business reality and timelines is a good, but difficult to accomplish, project.
User Rank: Apprentice
11/12/2012 | 1:09:02 PM
re: Project Management Offices: A Waste Of Money?
I was involved in several efforts at project management or scheduling during my 40 years of service in IT

every effort failed and for the same reason: managers

in no case would the managers yield control of their people to a set schedule

drop everything deal with the crisis is American Management

there are 2 ways work gets done: scheduled and response.

the construction crew putting up your new building works on a schedule. IT people do not know the meaning of the word: they are all responders -- like firefighters

if you want to set a schedule -- and have it work -- you have to place your people TDY to the schedule

making a schedule without committing the required resources is a pure waste of time.
User Rank: Apprentice
11/12/2012 | 3:47:45 PM
re: Project Management Offices: A Waste Of Money?
I find little value in this survey, an outsourcer who implements EPMOs is essentially saying let us do it, you don't know how it's done. If you want to say Organizations that don't know how to implement and work with a PMO will have a difficult time come see us we'll help. But, to say PMOs a waste of money, leaves negative connotation that is completely wrong about a PMO. As a vendor it's real easy to say we can streamline, standardize and add value all the key things managers love to hear, but Hackett would get eaten alive in a world of snowflake projects. 12 years I've been a Project Manager and YES I have resumed built a PMO and this survey only does one thing grab headlines to sale their services.
User Rank: Apprentice
11/13/2012 | 9:03:59 PM
re: Project Management Offices: A Waste Of Money?
This research is only IT focussed. Business Improvement Architects completed an exhaustive study on PMOs and EPMOs in 2005 and again in 2010. It included 850 organizations world-wide. We found that the most successful PMOs got out of IT and into the organization. IT is only one department and their projects most always include stakeholders outside of IT. We titled the last research report "How Project Management Offices Can Improve Organizational Effectiveness". Rather than focus on the research results, it includes actions that anyone can take to build and/or sustain their PMO. This article is OK if one accepts it is based solely on the results of a narrow group.
User Rank: Apprentice
11/23/2012 | 5:32:28 PM
re: Project Management Offices: A Waste Of Money?
Often senior general management is intimidated by technology and reluctant to interfere in technology programs or projects until it is too late. If these projects are to be successful they must not abdicate, delegate, or relegate the responsibility to conceptually envision, logically plan, or physically implement enterprise information system projects or programs.

As Thomas H. Davenport has noted in a 1998 Harvard Business Review article entitled, Putting the Enterprise into the Enterprise System. G«£Many chief executives, however, continue to view the installation of an ES (Enterprise Information System) as primarily a technological challenge. They push the responsibility for it down to their information technology departments. Because of an EISG«÷s profound business implications G«Ų and, in particular, the risk that the technology itself might undermine a companyG«÷s strategyG«Ųoffloading responsibility to technologists is particularly dangerous.G«•
User Rank: Apprentice
12/14/2012 | 5:06:15 AM
re: Project Management Offices: A Waste Of Money?
G«£PMOs G«Ű where good projects go to die, slowlyG«•, not because the PMO shuts it down because itG«÷s poorly performing, but because they cause it to perform more poorly than if they werenG«÷t involved.

PMOs are a DirectorG«÷s and VPG«÷s crutch so that they are not accountable, especially when they know they donG«÷t properly resource, support, or guide projects themselves.

PMs who are content-free cause projects to fail, and fail repeatedly.

The content-free who typically inhabit PMOs then leverage their particular skills across more projects. While perhaps not as deadly to any single one, the organizational tax across all is large.

Citing the PMI PMBOK or some more elaborate purchased methodology in place of any meaningful discernment, G«£check-the-boxG«• activities proliferate; real accomplishments, not so much [full disclosure: IG«÷m fully badged by the flat-earth society, and the business of certification is good].

Most enterprise projects of any scale or complexity require many real problems to be surfaced, understood, and meaningfully addressed. This is far too much for the content-free who reduce everything to lists, and a few phrases which are sufficiently ambiguous to be differently interpreted by and for each stakeholder.

G«£You need to check the boxes and do it this way.G«• Oh really.
User Rank: Apprentice
1/4/2013 | 11:17:55 AM
re: Project Management Offices: A Waste Of Money?
Looking at the size of the Hackett Group, I am willing to take a bet, that the Hackett Group has some form of PMO (although under a different title), to understand where it's consultancy resources are placed, and are they delivering to plan and budget for their assignment ;-) (sarcasm over)

The issue is generally not with the PMO, but with the sponsorship of a PMO. The same goes for good and bad project managers. If a project management delivery team as a whole is bad, then this can also be seen as an overhead from the business, and more than likely it is the sponsorship / leadership causing the issue.

When organisations 'invest' in a PMO, what are they looking for on their investment return?

An old friend of mine used to say 'a mechanics car is never properly fixed, or a decorators house is never properly decorated, so don't expect people in Information Technology to use information to be gathered by technology, to properly fix their problems!!!'

A PMO is the hub for all project / programme information, and the sooner the PMO is sponsored to use and recycle this information to help future projects to perform better; and this also goes for Agile as well (and I have worked with PMO's who have helped improve performance of Agile projects using past data and information), then the organisation will be more successful in delivering projects.

It would be nice to see people balance their analysis on what weak is, but also what successful looks like.
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