How PMOs improve project governance

One of the benefits of having a Project Management Office (PMO) is that good governance reduces the risks of project delivery and increases its predictability. I will explain how this works in practice using as a case study a Portfolio PMO that I managed.

How PMOs improve Project Governance

The organisation ran a fairly large number of relatively short term projects to set up software systems for new distribution clients. These Client Onboarding projects were run by project managers, but without reference to a documented methodology or a central co-ordinating body. The timescales were often unrealistically tight, and projects would often either miss the due date, or would overspend on additional resources in order to meet the due date.

The tight timescales were usually imposed as a result of sales representatives making ambitious promises to clients without reference to the organisation’s capacity to deliver. Overspend to achieve the deadlines was authorised by the same sales representatives that set the deadlines, but the money to fund the overspend did not come from the Sales budget, and no assessment was made of the effect of the increased effort on the other projects under way.

We were tasked with turning this situation around.

We made the following changes:

  • We set up a “pipeline” list of all the projects likely to be started in the near future, and put in place an approval mechanism so that no new projects (including client onboarding) would be started without the approval of a Portfolio Board.
  • We developed a monitoring approach to enable the Portfolio Management Office (PfMO) to detect situations where a project Change Request may be required. A discussion between the PM and the PfMO would be prompted by the triggering of either of two indicators:
    • Finances: Actuals to Date and Estimates At Completion (EAC) were monitored against approved Budgets At Completion (BAC), with indicators to show when EAC exceeded BAC by more than a tolerance amount (expressed in both absolute and relative terms).
    • Schedule:Key project milestones were monitored, with indicators to show if these were forecast to be late against the baselined dates.
  • We measured changes from baseline on both a cumulative and incremental basis, to prevent large changes being concealed as a series of small changes.
  • We escalated the authorisation of Project Change Requests to an organisational level dependent on the size of the change (in terms of costs, time, and business value)
  • We devised templates to support PMs in requesting changes and determining the approval level required, and monitored numbers of approved and rejected changes (to identify “noisy” projects).

As a result, project changes were reviewed and approved at an appropriate organisational level, the highest of which included a full review of the change impact on the rest of the portfolio. In the space of a year, this (along with other initiatives) moved the Client project portfolio from a situation in which all Client projects missed either time or budget constraints (and around 15% missed both!) to a situation in which just 20% of Client projects missed time or budget constraints, and none missed both.

Even if you are cynical and take the view that implementing such a Change Request process merely sanctions the breaking of initial Time and Cost constraints, then at the very least it ensures this is done with eyes open and in the full knowledge of the impact on the project portfolio as a whole.

This approach effectively reduces the execution risk to the portfolio, and enables the Portfolio Board to consciously decide where to focus the organisation’s limited resources.

If you would like to have the benefits of a scheduling approach like this but would prefer not to get bogged down in the detail, Pragmatic PMO can help. Why not take a look at our “Goal-oriented governance” service, and if that looks interesting, schedule a free 30-minute consultation to discuss how we can help you?

Author: Ken Burrell

Ken Burrell is a Programme and Portfolio Office (PMO) Professional, who through his company Pragmatic PMO makes targeted improvements to PMO practices to add value to Projects, Programmes and Portfolios. He provides senior management with the analysis they need to make decisions, and gives project and programme managers the support they need to deliver solutions.

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