PMOs, IT leaders and CIOs are commonly measured on their ability to complete projects on-time and on-budget. This is no longer enough. In today’s world, IT has a seat at the business strategy table, so we must look beyond our traditional metrics and challenge ourselves to ensure we are providing business value.
There is a fundamental gap between the business and technology groups in organizations, specifically when it comes to IT-focused PMOs. In a recent survey by Forrester Research, 53% of technology decision makers believe IT is accelerating business success; however, only 31% of business decision makers believe IT is accelerating the business. Gartner also found similar results; their survey shows that only 38% of PMOs measure projects to ensure value is delivered.
Adding value should be the top priority of any IT or PMO organization. Here are three ways organizations can close the gap.
#1 Have the Conversation
We all know you cannot manage what you do not measure. Start by asking yourself where IT and the PMO stands. Have an honest assessment of the status quo. What is the realistic perception of the technology and project management functions?
As part of this process, document the metrics and criteria you are focused on. Is your organization focused on metrics that measure day-to-day execution of projects or are you measuring the outcomes and impact to the business? The difference might seem trivial, but it can make a big difference (more on this later).
The last area of your self-assessment should be to decide if you have the proper communication channels. Documenting how often and what vehicles you are using for reporting results to your stakeholders could help uncover some areas of improvement. If the communication is too much or too little and not easy to consume, then the delivered value will never be visible. Ideally, communication should be often and fluid, providing information and incorporating feedback.
#2 Focus on Outcomes, Not Activities
Activities are easy to measure – completion of a task, delivery of a project, or simply being on-time and on-budget. However, activities are not always related to the impact that you are making for the organization. You may have heard me use this analogy before: a doctor comes out of the operating room and says, “The surgery was a success, but the patient died.” The activity (surgery) was completed and may have been on-time and on-budget, but the outcome of the surgery was far from desired. Every PMO can take a lesson from this story – focus on the desired outcome of the project to generate more value (perceived or realized).
In a recent presentation at Gartner’s PPM Summit, the data presented revealed that we are all guilty of focusing on activities, most specifically, with 59% reporting “on-time completion” and 65% reporting “completion within budget” as their measurement of project success. However, the same survey revealed that these measures had the lowest levels of effectiveness on the organization, scoring 5.0 and 5.1, respectively, on a scale from 1 to 7. The two measures that had the highest level of effectiveness were “supporting a major business strategy goal” and “full delivery of the value captured in the original business case.” These two measures showed up at the bottom of the stack for how we actually measure our projects.
If the PMO can clearly outline the expected outcomes of a project and then report project statuses on that outcome, then the value to the organization will increase – especially if the outcome is measured in business impact terms.
#3 Measure Value and Outcomes
Saying that we must measure outcomes and quantify value is easy, putting them into practice can be difficult – but it doesn’t have to be. There are several metrics and categories PMOs can use to help communicate the value of their projects.
Portfolios: Categorize your projects into portfolios to naturally help ensure organizations deliver value in two simple ways. First, get agreement on the type of projects you are going to staff and initiate during the planning phase. Which projects are you approving and why? Secondly, force yourself to have visibility into all of the projects you are currently executing. Are you working on strategic initiatives or maintenance? Do you have the right mix of work to keep the business competitive? Organizing work into portfolios leads to discussions and better decision making. You can share your resource allocations and priorities with key stakeholders – showing them that the PMO is executing projects that are making the largest business impact.
Scoring: Put a quantifiable number to each project request in the form of a score to assess the amount of value. Scoring works well with all organizations regardless of maturity because scoring can be configured to fit your specific culture, goals, and process. In fact, in our recent survey, Innotas found close to 50% of organizations use scoring to ensure alignment. When done correctly, scoring would include inputs from the PMO, business stakeholders, and even the requestor of the proposed project. Aggregating these inputs and applying the appropriate weighting to the scoring criteria can provide accurate and quantifiable alignment to corporate objectives or goals – ensuring delivery of value.
Business / Strategy Impact: Value is ultimately measured by the amount of business or strategic impact on the organization. There are several measures that PMOs can use throughout the project planning and execution phases to properly communicate and measure business impact. A few that come to mind include: revenue, cost reduction / avoidance, profitability, market penetration, resource utilization, customer satisfaction, and compliance. The challenge is choosing the measures that align with the organizational objectives.
Ensuring that your PMO takes a value-centric approach to project delivery is critical for longevity in any organization. Getting your organization behind you in this effort can be challenging, but not impossible. For additional commentary and tips, watch this recent on-demand webinar: Making the PMO a Value Center.