Portfolios and Project Management Organizations (PMOs)

To do a project, or not to do a project. That is the question.

The rationale by which project decisions get made varies widely from organization to organization, and is for the vast majority of organizations largely a subjective process. While a few short years ago the linkage between projects and strategy was a much more tenuous one, it is now becoming much more widely recognized that projects are a key means of realizing organizational strategy. The choices we make in terms of the projects that are taken on have a significant influence in defining organizational strategy for the organization.

From the perspective of the PMO, an important consideration here is where and how the process of prioritization occurs in deciding which projects to proceed with. Because prioritization represents the intersection between strategy and one hand and project delivery on the other, a strong case can be made for the PMO managing the prioritization process. This is in fact emerging as one of the key roles that the PMO plays in several organizations I have worked with. Arguably, however, an equally strong argument can be made that prioritization must be managed by the business. Given the growing trend towards the PMO at least playing some role in the prioritization of projects, what emerge as key questions are: a) should this be a role the PMO takes on?; and b) what aspects of the role are most appropriate for the PMO to manage?

The key danger in this role falling to the PMO lies in the fact that a true PMO cannot make decisions on behalf of the business. They can administer the process, facilitate the identification of criteria, and even maintain the records of the decisions that have been made, but they cannot actually make the decisions. What this really reflects is the role of PMO as facilitator, rather than PMO as owner, a theme that has emerged many times in previous columns.

Were the PMO to truly manage the prioritization process, they would in effect be responsible for setting the strategy for the organization, an abdication of the role of the business itself. That said, where many organizations fall down on the business side is on having a process to effectively manage prioritization. Prioritizing and choosing projects all too often devolves into choosing between apples, oranges and kumquats — without a process and objective criteria for prioritization in place, making choices between projects becomes more about a popularity contest than it is about objective decision-making. Looking at executive teams that I have worked with in the past, many have very confidently been able to make effective decisions within the bounds of established evaluation criteria, but have struggled with the wide open question of “what criteria do you need to see demonstrated by a project in order for it to be able to proceed forward?”

What the PMO can do to effectively respond to the challenges described above is to manage the process; to facilitate its definition and use, and to act as a guide in the establishment and application of prioritization criteria. This is a much more strategic role than what many PMOs may do today, but done well represents a significant opportunity for the PMO to be able to add significant value to the project management process — by helping guide the organization in choosing the right projects, the chances for projects to be successful rise exponentially.

To be able to facilitate an organization's prioritization process, there are some fundamental capabilities that the PMO needs to establish or ensure are in place:

• A process for prioritization and approval. One of the most significant challenges in project initiation is understanding how a particular project must be prioritized and approved. For some memorable organizations I have observed, even after 12 months I couldn't objectively tell you up front what a process a specific project would need to go through to get approved. Every project was treated differently, with some flying through the approval process in record time and others that were equally if not more valuable being bogged down with committees, reviews, business cases and consultant reports. For any project of a specific type, size and complexity, your organization should have in place clear guidelines that define what needs to be done to get project approval, and who is responsible for granting that approval.
• Clear criteria for prioritization and project selection. Over and above understanding the approval process, there is a need to define clear and objective criteria of how projects are to be prioritized. Simply put, prioritization criteria are the qualities or attributes that a project needs to have in order to be able to proceed forward now. It defines what aspects a project must demonstrate and support if it is in fact aligned with the strategic plan. Whether the criteria are strategic alignment, risk, resource availability or financial return, the criteria should be defined, understood and able to be evaluated on a consistent basis from project to project.
• An understanding of budget and resource capacity. Prioritization is one thing; the capacity to deliver on your priorities is another. Within any category of projects, there will from year to year be far more projects than there is the financial and resource capacity to deliver those projects. This means understanding the core budget available for projects, and more importantly the resource capacity of the organization to staff them. Resource capacity is particularly challenging simply because so many organizations are lacking the tools to be able to effectively track how much effort is available for project work, and how much of that effort is already committed to initiatives underway.
• Commitment to use the process. Finally, the PMO can only facilitate a process where there is willingness and commitment for the PMO to facilitate the process. Where the organizational commitment isn't there, a process cannot be imposed on the organization. Bottom line, the prioritization of projects is still a business choice, and regardless of how tempting it might be, a process cannot be imposed if the business is not prepared to accept a process. More importantly, commitment to use the process must mean that all projects are subjected to the same prioritization process — if a project is allowed to bypass the process that the rest of the opportunities are required to adhere to, the process will no longer be credible and prioritization will revert to gamesmanship.

There is absolutely a role to be played by the PMO in supporting and facilitating the evaluation and prioritization of projects and opportunities. This role, as discussed above, must be as a facilitator rather than a decision maker. As awareness of the role of projects in delivering strategy continues to grow, however, effective facilitation is the capability that most organizations will need most.

A side effect of this role is the increasing move of the PMO to a role of being a corporate capability, rather than being the province of a single business unit or functional area. PMOs that do not report to a corporate level today will find this role much more difficult to take on, simply because their reporting structure can lead to a perception of conflicts of interest being present. Where a corporate mandate and accountability structure already exists, this role becomes more readily accepted. The value that results is better decisions, better projects, and ideally better project results. Isn't that what the PMO is all about?