The PMO as a vehicle to execute your Strategy

Below is a transcript of the presentation I gave in Amsterdam in October 2018 at the 10th Strategy Execution Forum:

Imagine you are a small enterprise, and you are working on one single project. A project is defined as a group of work activities that have a defined start, a defined end, and a clear objective to deliver a unique product or service. They are mainly constrained by two things:

• A budget that defines how much monetary resource the project manager is entitled to spend on the project;
• And a schedule that defines when activities are to take place, and when the deliverable of the project will be completed.

There is more to it, of course, but for the sake of this presentation, let us focus on those two aspects only. If, during the life of the project, the project cost increases, or the project is delayed, there will be a negative impact on the project objectives.

Now, as your business is growing, let us introduce a second project. Projects A and B are managed by different project managers, working in different departments.

Project B is also constrained by a budget and by a schedule. But Project B also has DEPENDENCIES from Project A. This means that some activities within Project B are relying on deliverables coming out of Project A. And Vice-Versa.

Now, an increase in cost or a delay on Project A will not only impact the objectives of Project A, but also the objectives of Project B. And vice-versa. And the worst part is that both project managers might not even be aware they owe something to each other…

Multiply this by many … smaller projects, larger projects, projects with a lot of incoming dependencies and projects with a lot of outgoing dependencies; each of which potentially managed by different project managers, working in different parts of your organization. This is a classic project landscape in a larger business, and the one place where you are likely to find clarity on this chaos is the PMO.

This is also where the dimensions of Program Management and Portfolio Management come into play. To structure your project portfolio, the PMO will consider a combination of attributes like the use of similar resources, serving similar customer, delivering similar products or services or how each project and program contributes to executing your Strategy.

From my experience, this is by far the most critical way of looking at which project you will need to start, stop, accelerate or defer, when your organization is working with finite resources. This is also where I have seen most organizations fail as people working on formulating the strategy are working in isolation from people who are working on project, programs and portfolio management.

Inevitably, you will end up with a disconnect between your formulated strategy, and your project portfolio. You will have projects that will not contribute to your strategy at all, which will prompt the question:

WHY are we doing this?

And some strategic objectives that will not have any vehicle for execution, which will prompt the question:

HOW are we delivering this?

While this absence of a link between your formulated strategy and your portfolio of projects still allows for start, stop, accelerate and defer decisions, these will be solely based on project considerations like cost, resources, etc. and you run the risk of a significant – and unpredictable – impact on the delivery of your strategy.

In reality, what happens then, once your strategy is formulated, once your strategic plan is written, once you realize there is a missing link: the obsessive question springs back to your mind: “HOW are we delivering this?”

And with this question comes the time for emergency meetings, hasty decisions and artificial links. Because common sense dictates that these two faces of your business must be somehow linked. You might get some right, but you will mostly be wrong, because you cannot “invent alignment”.

The ideal scenario is where links have been established naturally between each layer of your Strategic Architecture, and their respective contributing work activities. Here, there is alignment. Here, most of the “how’s” and “why’s” have a clear answer. And to me, the secret to be successful at bridging the gap between these two faces of your business lies in three critical items:

• The RIGHT THING
• Done by the RIGHT PEOPLE
• At the RIGHT TIME

THE RIGHT THING

If you look at a Strategic Architecture map, it all starts at the top of the pyramid with your “Vision”. This is the “where” you see yourself in the future, while your mission is the “why” you exist. It is also the “HOW” you are going to fulfill your Vision.

From here on, every layer you move down is the answer to the same question: your Strategy is the “HOW” you will achieve your Mission; your Strategic Objectives are the “HOW” you will execute my Strategy, and the Strategic Initiatives is the “HOW” you will deliver your Strategic Objectives. The terminology might vary but the concept stands.

Naturally aligning your projects and your Strategic Architecture is the only way to end up with a healthy portfolio. This gives you the ability to determine which projects to Start, Stop, Accelerate or Defer. Inside of your portfolio, you will find programs. Their primary area of focus is Benefits Realization. Inside of your programs, you will find projects. Their area of focus is to deliver specific objectives.

To give you a simple example. Let’s say that you are managing three projects. The first one aims at delivering a car; the second one aims at delivering a gaming computer; and third one aims at delivering a house. Project Management would focus on delivering those items.

Program Management would focus on realizing the benefits for each of these projects: being able to move from A to B without having to walk; being able to play games with your friends even if they are far away; and being able to sleep in a covered and safe shelter.

Portfolio Management would give you the ability to prioritize which project to focus on if your resources are suddenly becoming finite: typically, the benefit of entertainment would rank lower than the benefit of mobility, which in turn would rank lower than the benefit of shelter. So, when money becomes a limiting factor, you would prioritize the car over the computer, and the house over the car.

Let’s take a less simplistic example. Imagine that you are running 7 projects in parallel that use up a certain quantity of resources (manpower, money). You also have three identified Strategic Objectives.

• Project A is a regulatory requirement. If it does not deliver its expected benefits, you will have to shut down your company.
• Project B contributes to delivering 70% of Strategic Objective #1.
• Project C contributes to delivering 30% of Strategic Objective #1.
• Project D contributes to delivering 100% of Strategic Objective #2.
• Project E contributes to delivering 50% of Strategic Objective #3.
• Project F is not directly contributing to delivering any of the Strategic Objectives.
• Project G contributes to delivering 50% of Strategic Objective #3.

Due to a decrease in the revenue generated by your organization, the resources allocated to managing projects are cut significantly and you now can only execute 4 of your 7 projects.

Which ones do you Stop or Defer to a later stage? Believe me, this question is by far one of the most difficult to answer in real life examples: companies are generally extremely bad at pulling the plug on projects, and instead, they will spread their resources so thin to keep all the projects alive that they end up not delivering any of them on time, on budget and most importantly they end up not realizing any of the expected benefits, often spending more than planned in the process…

Once you get rid of the affective factors – I’m thinking about the Project Sponsor that shouts the loudest – effective Portfolio Management will give you most of the required answers. Let’s look at this example, assuming each project costs a similar amount of resources:

• You cannot kill Project A, as we have established, it is a regulatory requirement;
• You cannot kill Project D, because it is the only vehicle to deliver Strategic Objective #2;
• Project F does not directly contribute to delivering any of your Strategic Objectives, therefore, it is a good candidate to be stopped;
• Project B is your biggest contributor to delivering Strategic Objective #1. Therefore, it is better to keep it alive and defer Project C;
• And between Projects E and G, there is no right answer with the information available. They both contribute equally to delivering Strategic Objective #3, so we will have to arbitrarily kill one and focus on the other one.

There you go, your new “active” portfolio is now 4 projects, aligned with your Strategy. In real life, there are other considerations that come into play, like the relative cost in resources of each of those projects, or how far in planning or execution they are in. As an example, stopping a larger project might enable you to continue several smaller projects. Stopping a project that has just started is better than stopping a project that is close to completion.

You can count on your PMO to run several scenarios to determine which option is the best, but all these arbitrations are easier done when your portfolio of projects is naturally aligned to your strategic architecture. This is THE RIGHT THING.

THE RIGHT PEOPLE

The disciplines of Project, Program and Portfolio Management are very different. Every framework in the world has their respective tools & techniques outlined in different standards, like the ones published by the Project Management Institute’s.

There are many skills listed in these books. They are not mutually exclusive, and there is actually quite some overlap, but after a couple of years, a certain pattern emerges, and it is possible to outline the top 3 skills in each of those disciplines:

In my book, “A good project manager’s” top skills would be:

• Communication: This should not come as a surprise to anybody. PMI® states that Communication constitutes 90% of a Project Manager’s job. You communicate with your project team, with your senior stakeholders, and with the rest of the world;
• Motivation: This is essential, as in most matrix organizations, your project team does not really report to you other than with a dotted line, so motivation becomes an essential tool in getting people you don’t have formal authority over to get the job done;
• Problem Solving: When a Project Manager is not communicating, he is solving problems, so this one is pretty self-explanatory as well.

A good program manager will exhibit:

• Analysis: So he can understand clearly how to define the measurement methods for all expected benefits before even the project starts;
• Steadiness: Ah … here I need to explain this one a bit more. Benefits are rarely realized within the lifecycle of the project. They usually happen after the completion of the project, and the project team will often move onto another project. When comes the time to measure if the project has delivered the expected benefits, 3 months after closure, 6 months after closure, 3 years after closure, you don’t have access to the team who implemented the project, and the team who was the customer of the project is heads down in its operations, and they have no time for the PMO guy who comes to ask more question about the product they have been using for the past six months or more. So you will need to come back, again, and again, until such time where you have all the information you need;
• Consistency is my number three choice. As you are measuring benefits on many different projects, you need to ensure that the methods of calculations are consistent on the long run so that you don’t create a problem with Quality Audits in the future.

A good portfolio manager will first and foremost have:

• Vision. This is what enables him to look at the strategic architecture and quickly establish the best structure so that the portfolio of projects supports your Strategy Execution;
• Analysis is an essential skill in portfolio management, as you need to compare many different scenarios based on many different factors and attributes;
• Negotiation is also essential, especially when it comes to determine which projects to pull the plug on. You remember on the previous slide when we “killed” three projects? That’s three project sponsors “losing power”, that’s three project managers, and their respective teams being reassigned to work for others. This is not a pill that is easy to swallow, and the requirement to negotiate with all the stakeholders to make them understand the basis for decision is incredibly high.

A Strategic PMO team member would have a good mix of all these skills, as well as a good understanding of how a strategy is formulated, and an even better understanding of how to slice and dice a Strategic Architecture into manageable pieces of work. If you find someone like that, congratulations, you have found the RIGHT PEOPLE.

THE RIGHT TIME

Now, let’s have a look at a generic Strategic Planning process flow chart. Again, terminology may vary, and your organization might not have all the boxes, but the overall look and feel should be pretty close: It generally starts with the Strategic Planning process. This is where you would formulate your strategy. In the Budgeting process, programs and initiatives would be challenged before being added to the next budget cycle. In the Business Planning process, these programs would make it into the Business Plan. Finally, the Project Management process is where projects would be initiated, planned, executed, and then closed.

During this lifecycle, there are two key milestones that are of interest for us today: First, the Business Case. Typically written during the Strategic Planning process, it defines in details for each Program, what are the expected benefits; how they will be measured; by whom; and when.

Then comes the Project Charter. This document is typically written right at the start of the Project Management process, and defines the objectives and deliverables of a project. It also covers the basic schedule, when it starts, when it stops, the allocated budget, and it gives authority to the Project Manager to spend resources on the scope.

In most of the case, I have seen the PMO and the wider Project Management community of practice get involved when projects are about to be initiated. Does that sound right to you?

Of course not! This is way too late and it will inevitably lead you to one of the first scenarii I mentioned earlier. No links at all, or wrong links. Because you cannot invent alignment!

The only way your experts at delivering and controlling projects can support your experts at formulating strategy to define the best structure to execute your strategy – to do the right thing – is at the very start of the lifecycle, before even the business cases are being written. This is the RIGHT TIME.

CONCLUSION

To summarize. Regardless of the size of the organization, of the industry you operate in, the country or even the continent, where I have seen most organizations fail to bridge the gap between strategy formulation and strategy execution is due to a combination of these three reasons:

• NOT DOING THE RIGHT THING either due to a lack of understanding of the disciplines of Project, Program and Portfolio Management, or to a belief that these disciplines are purely tactical and their contribution to the success of your strategy execution is very limited;
• NOT HAVING THE RIGHT PEOPLE by acquiring the wrong skillset in your PMO. This is typically linked to the previous point, as most organizations still see the PMO as a group of clerks taking project meeting minutes and policing project managers to ensure reports are filled on time;
• NOT INVOLVING THE PMO AT THE RIGHT TIME, and here I’m going to be brutally honest, I almost never have seen an organization doing this right. There is this protective aura around Strategic Planning, this belief that only senior leadership and a handful of selected strategy guru are allowed in the room. This is wrong, you need to get your delivery & controls experts with your strategic planning experts and your functional leads as early as possible.

This is not a miracle recipe, but if “The Right Thing” is done by “The right people” at “The right time”, your will find yourself on the path to successfully execute your strategy.