PMO Agility: Business case to operate as a Profit center

In a recent networking event that I hosted on Effective Agile Transformation, a question came up from interested attendees on whether a Project Management Office or Program Management Office (PMO) should have different metrics to measure projects. An example of a metric that was tossed around was that projects in a traditional waterfall approach may use schedule variance whereas agile projects may measure velocity.

I believe these questions are rooted in traditional thinking where people look up to Agile as a radical way of doing projects differently only to arrive at the same results. Stacey’s diagram that Agile principles promote call out that not all projects will benefit from applying agile principles of iterative and incremental delivery. So, all types of projects should be evaluated based on value generation. Any type of key performance indicator basically evaluates this value generation as evidenced by Michael Porter’s value chain theory where project management is an indispensable support management activity.

First, PMO (sometimes called Value Management Office, Value Delivery Office, Centers of Excellence), is a portfolio function (which means there is no end date, and any project/program may or may not be related). The goal of the PMO is a governance function rather than management function. The PMO should continuously review seismic changes in the market and its impact on the organization (external influences) and plan to build capability and capacity. So, PMO functions are not just metrics driven. In my opinion, PMO is responsible for the following so that the organization's strategy and goals are supported sometimes by allowing to take on projects never taken by the organization before laying the foundations of profit center.

1. 3C: Capability, Capacity, Change Planning (e.g., EEF/OPA support)
2. 3R: Resources, Risks, Reporting
3. Knowledge Management is supported by focusing on both 3Cs and 3Rs through ongoing training and evaluation.

As some organizations are in the emerging stages with five different levels (like supportive, controlling, directive, mature, and optimizing), it is possible that the PMO focus takes on some levels of measures of performance and metrics to monitor these measures.  From that angle, let us explore profit center thoughts from a measure's perspective. 

For instance, let us consider “Time to market.” This metric measures the elapsed time from the onset of the project to its delivery. Measured from the start date to the end date in the baseline may go for, say 8 weeks. Now, an experienced project manager may use the “80-hour” productivity rule to mark a milestone introducing checkpoints for incremental value delivery. This milestone may be a requirement freeze, delivery of a certain development, receipt of assets from a client, procurement of a vendor contract, etc.  This 80-hour commitment is already making a project manager think agile in a project that need not lend itself for agile implementation. Unlike an agile project, this 80-hour duration need not be equated to a certain number of story points to establish a team velocity.

Therefore, while every PMO needs to be formed based on business needs and not all metrics may be equally extended to all PMOs, I believe and challenge all business driven PMOs to think and act like Profit Centers instead of cost centers while measuring value generation. This value generation underscores project managers to become skilled at proactively managing the projects by becoming subject matter experts in the domain skills relevant to the project, master organizational skills to mitigate risks, learn negotiation skills to control the project scope but allowing changes, and understand empowerment skills in energizing and motivating the team.

As an example, let us take the “Time to market.” Let us say, if two similar projects that focus on developing a website are developed by two different project managers. Now, if on a consistent basis one project manager can deliver projects of similar complexity in 6 weeks while the other project manager takes 8 weeks to deliver, then, the skilled project manager has shown the organization that the cost savings for 2 weeks on a consistent basis from the agreed project baseline duration of 8 weeks. If PMOs operate as profit centers, then, the PMO can look for increasing the skills of the PM in project management areas to think and be agile. 

What are your thoughts?