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Lars Linnekogel
Lars
Linnekogel

PMO Fundamentals: The Project Management Office in Times of Strategic Transformation

10.07.2019
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The business world is in a state of upheaval: the volatility of many business areas and industries has increased rapidly. According to the Harvard Business Review, while the life expectancy of companies in the Fortune 500 Index was an average of 75 five decades ago, today it is less than 15. The age of globalization and digitalization opens up many new opportunities for companies, but also presents them with new challenges.

In this environment, it is increasingly important for managers to strategically and successfully lead their company into the digital future. The challenge, however, lies in identifying the right adjustment areas, making level-headed directional decisions and proceeding in a focussed manner during implementation in order to keep pace with the demands of the times. In this blog post, we explain how an agile and effective Project Management Office (PMO) can make an important contribution, what role a PMO can play in prioritizing and structuring strategic transformation tasks, and how you can successfully build a PMO.

What Does Project Management Office Stand For?

Project Management Office is the term used to describe the organizational unit within a company. Its task is to make the implementation of projects more efficient and to generate real added value for the company’s success by focussing on strategic transformation. It supports successful implementation in three ways:

  • Portfolio management whereby all a company’s projects are combined.
  • Program management whereby several individual projects are brought together to achieve an overarching goal.
  • Project management that is specifically tailored to individual projects.

An effective PMO ideally assumes responsibility on all three levels, guiding the planned projects to their desired goal.

What Are the Tasks of a PMO?

The tasks performed by a PMO cannot be generally defined by technical literature or best practice examples. Each company defines its own requirements for its Project Management Office. This will depend on factors such as size, industry, structure and goals of the company.

At the same time, we can distinguish between two basic types of PMO: Administrative PMOs focus on methods and standards (the HOW), while Activist PMOs focus on prioritizing, challenging and directing initiatives (the WHAT). The most important tasks for a PMO can be summarized as follows:

  • Strategy: At the highest level, the PMO can determine the direction of the company for portfolio, program and project management and adapt it to the strategic goals of the company. In addition, it can organize company-wide projects and implement strategic measures.
  • Standardization: As an excellence center, the PMO can create uniform specifications for standards, methods, quality requirements and guidelines for project management within the company.
  • Organization: The PMO can provide and manage project-related services and tools to support a business unit and coordinate all projects and available resources across the company.
  • Operational Support: The PMO can provide temporary services to support a specific project or program. Modern PMO approaches such as the “Activist PMO” also generate strategic impulses and constructively question project content with the aim of improving project results for the organization.
  • Controlling: The PMO monitors the achievement of project goals and company-wide transformation programs and creates transparency for corporate management. It also monitors the increase in effectiveness and efficiency of project management within the company and ensures compliance with existing methods and standards. 
  • Knowledge Management: The PMO can support project work by providing or organizing coaching and training sessions for project management staff. In addition, it serves as a central office for the administration of all projects and programs and is responsible for the overall project documentation.

Where Should a PMO Be Located in the Company?

The Project Management Office primarily acts as a service provider within the company in day-to-day business. For this reason, its success largely depends on how satisfied stakeholders are with the PMO in their role as customers. For this to work, stakeholders and their expectations must be incorporated into the PMO’s development and work at an early stage. Therefore, it is also essential to define the PMO’s competencies within the company. What is important here is that the PMO must be in a position that enables it to achieve the goals that have been set.

If a PMO is primarily responsible for operational and organizational tasks, it should be located close to the manager of the respective business unit. On the other hand, if it is expected to take over strategic project management, it is essential that the PMO is assigned direct responsibility by the company’s management. This is the only way to give the PMO the hierarchical weight it needs to effectively perform its role within the company.

How Can a PMO Be Set Up in an Organization?

There is no single blueprint for the ideal Project Management Office, as each PMO is tailored to the specific needs of each organization. However, there are some key issues you should take into account when seeking to successfully implement a PMO in your organization.

Before setting up a PMO, it is essential to define the precise objectives that the PMO should achieve for the company and, as a result, the tasks it can handle. Start with an analysis of the current state of project management in the company and ask yourself what expectations are attached to the structure. In addition, all relevant aspects of project management – strategies, methods and processes – should be recorded and previous experience with completed and ongoing projects taken into account.

As a second step, you should create a concept for the structure of the PMO. Three sets of questions should be asked here:

  • What tasks should the new PMO perform in the company? Should it be administratively or activistically driven? Which project management services should be located at the PMO?
  • Who are the PMO’s stakeholders? Which departments within the corporate structure are directly and indirectly affected by the establishment of the new PMO unit?
  • What concrete business value should be generated for the company through the creation of the PMO?

As is the case in all organizations, the establishment of a new unit in a company initially creates uncertainty among the existing players. Project managers in particular often see PMOs as an additional controlling authority. To ensure this idea isn’t rejected outright, it is extremely important to get employees on board as early as possible. This is best done by ensuring high levels of transparency and the involvement of all stakeholders. After all, a PMO should help both the company’s management and project managers to interlink strategic transformation programs in an optimal manner. This way, PMOs also make an important contribution to the success of all individual projects.

In practice, it has paid off to define very precise goals when implementing PMOs. For example, should a PMO support all projects in a department, or concentrate on the ten most strategically important projects? Organizations that take care from the outset to achieve results as quickly as possible increase the PMO’s level of acceptance in the company. In order to have this positive impact, the new department should not be overloaded with too many tasks and responsibilities at the beginning. This way, it can grow over time and become a win-win situation for the company and employees alike.

What Are the Experiences with PMOs in Corporate Practice?

A study conducted by the HfWU Nuertingen-Geislingen University in cooperation with the German association for project management (GPM) gives an answer to this question. It is based on a survey of more than 250 PMO professionals in companies. The most important results at a glance:

  • The most important success factor is considered to be the appropriate design of the PMO within the company across all industries.
  • 94 percent of respondents rated the added value generated by PMOs as “great” or “very great”.
  • The greatest added value generated by PMOs comes from avoiding the duplication of work within the company.
  • A quantitative success measurement increases the acceptance of PMOs within the company.
  • The integration of PMOs into strategic processes is still deficient in the majority of companies.

Do you want to know how to make project management in your company more effective? If so, do the PMO health check!



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