The Strategic challenge
The primary role of a PMO is to oversee the successful execution of the organization’s strategy delivered through a portfolio of projects. This strategic perspective makes sense of the need for and role of the PMO. Without this perspective a PMO’s role and value is greatly diminished if not negative.
However, most PMOs are stuck in the project-reporting vortex and while they hear of “the strategic PMO”, as one PMO Manager put it, “How do I learn to become strategic?”
Becoming ‘strategic’ requires a strategic focus plus the relevant tools, techniques and processes plus the requisite knowledge and skills—that are all now available.
The Strategic PMO role
In TOP terms, portfolio management is part of the top Strategy/Investment lens. The PMO manages and tracks the execution of the strategy. But it is not a passive role taking what you’re given without question and just executing; you need to contribute far more value than that.
Before you can execute any strategy you first need to be assured that it is capable of being executed, that the highest priority initiatives are executed first and in the right order, and that progress towards full strategy execution is visible and managed. This is not standard portfolio management.
Can the strategy be delivered?
Key to your success is to be seen to deliver your organization’s strategy. Many PMO Managers are concerned that their organizations do not have a strategy. There is no visible, published ‘Strategic Plan’ that they can align or contribute to. This does not matter. Every organization has a strategy even if it is not documented. Each organization’s strategy is determined by what is important to it, where it focuses, what it does and does not do. Your organization’s strategy can be gleaned from what is and is not happening even when it is not documented.
Therefore, not having a formal ‘strategy’ is no impediment to becoming a Strategic PMO.
Once your organization’s strategy is known it can be assessed for practicality and feasibility. Is it actually implementable? Will it actually deliver the results desired or claimed?
A cost-reduction strategy was aiming to achieve an annual saving of $32 million. However, when assessed, the proposed strategy would at best deliver a saving of $18 million but more likely only $11 million. This strategy was not going to achieve the targeted strategic (financial) goals. However, in this case this shortfall was discovered at the outset rather than becoming a surprise at the end when the financial goal was badly missed.
Seventy percent of strategies are not fully delivered. Partly this can be because organizations are overly optimistic – trying to do too many things simultaneously. But often strategies are not executed because there is no repeatable process for converting strategic intentions into practical projects. This is a key role of the Strategic PMO – ensuring the planned portfolio will deliver the strategy and the strategy will be delivered.
Becoming ‘strategic’ is a choice
To be a ‘strategic PMO’ you obviously need to be intimately connected to your organization’s strategy.
The ‘authorities’ will argue being ‘strategic’ requires a level of ‘maturity’. We totally disagree. We argue that it is a choice—but a choice that needs to be supported by the requisite tools, techniques and processes such as a Strategic Contribution Assessment Tool. When you choose to become ‘strategic’ and equip yourself with the requisite tools and training, you can immediately increase your results and perceived value (and, often, survival prospects).
Measuring each project’s exact strategic contribution
A Strategic PMO needs to be able to accurately measure at the detail level each project and program’s exact strategic contribution.
There is little-to-no value trying to measure this contribution at the overall strategy level (eg ticking that the project aligns to the strategy of “Reducing operating costs”). You need to assess each proposed project in terms of
- exactly how
- and how much it contributes
- to each strategic imperative at the detail level.
Smaller organizations will have 20-to-30 strategic imperatives; larger organizations can have up to 50 strategic imperatives (any more and the focus of the organization will be too diffused). Strategic imperatives break each strategy down into the areas critical to the strategy’s delivery. For example, some strategic imperatives that could deliver the “Reducing operating costs” strategy might be:
- Reduce sales and marketing costs
- Increase operating cost controls
- Increase staff productivity, etc.
The key is to be able to assess each project’s specific contribution to each of these imperatives. The level of contribution can be scored on a 0 (no impact) to 3 (high impact) basis.
Then each imperative needs to be weighted in terms of its relative importance to the achievement of the strategy. In this way an objective ‘strategic contribution score’ can be generated (level of contribution x imperative weighting) that
- Can be compared across the portfolio to identify the highest strategically-relevant projects
- Enable the detailed execution of the strategy to be tracked and managed – which strategic imperatives are being addressed by which projects and how.
A major organization was embarking on a transformational strategy with a number of key initiatives. However, analysis of the strategy contribution of all of the initiatives found that one whole strategy was not being addressed by any initiative. This big deficiency in the strategy’s execution was immediately highlighted to senior management to be addressed. This would not have been possible using conventional strategy alignment techniques.
You get the idea – being a Strategic PMO is an active, challenging role to ensure the organization only invests in the most relevant and worthwhile projects.
Planning and prioritizing the portfolio
Generating the portfolio needs to go hand-in-hand with the corporate planning process. Depending on what projects can be resourced (people, funds, management time) the corporate results can differ over time. Many ideas will be generated, but which are viable? Which can be successfully delivered? Which are a priority?
Most organizations do not really assess ‘deliverability’ except in terms of scarce resource availability. But there is much more than this required. A key criterion is the assessment of your organization’s capability to successfully deliver each initiative, project or program. The key word here is ‘successfully’ as you can start any project but only successfully deliver those that are within your organization’s capability to deliver.
Every day organizations are taking on projects that they cannot successfully deliver—that are beyond their organization’s capability to deliver. These projects will go over time, over budget, deliver compromised results…or fail completely. Sound familiar?
As a Strategic PMO you need to know your organization’s value delivery capability level is and also be able to measure the level of capability required to deliver each project so as to immediately identify any projects beyond your organization’s delivery capability. Starting these projects will only lead to massive downstream waste.
Where a project is beyond your organization’s capability to successfully deliver you need to:
- Change the project to be within the organization’s level of capability, or
- Quickly uplift the organization’s capability to the level required to deliver the project, or
- Cull the project and focus your resources elsewhere where you can be successful.
NB This focus on ensuring you can be successful, that you can successfully deliver each project, is different to most orthodox approaches that only seek to avoid (total) failure. Currently, when success if not the primary measure of success, compromise with all of its downstream impacts is seen as acceptable. As a Strategic PMO, compromise is your enemy, as it will undermine your perceived and actual value to the organization.
As not all ideas and initiatives can be resourced you also need an early prioritization process to quickly determine the potential viability and value of each proposed idea even when it is not yet well formed. Eliminating time and money spent on bad ideas can save your organization millions and allow more focus on the projects you should be doing. You need to work with the business areas to help them identify which ideas and initiatives are likely to ‘fly’ and which are likely to be killed before or at the business case stage and, therefore, should not be pursued. This only requires four items of information to be assessed.
All the time you need to be (and seen to be) increasing the delivered value from the portfolio.
Enabling the strategy’s execution
Once you have your ‘strategic portfolio’ you need to make sure it is successfully delivered.
For any portfolio to be successfully delivered (note this continued emphasis on ‘successfully delivered”) you need to have in place effective and suitable
- Prioritization processes - rarely in place
- Governance teams - rarely educated in their roles
- Project leadership teams - nowadays, rarely aligned to the organization
- Skill-sets in both the project and the business.
You also need to ensure the project and organization is set up to deliver the size, scale and complexity of the approved projects, and can absorb the planned level of change. Taking on too much change concurrently can lead to disaster as all projects fail, are resisted or cause staff to leave in droves.
Meanwhile you need to monitor the individual and cumulative risk profile of the portfolio to ensure your organization is not taking on too many high-risk projects simultaneously. One or two high-risk projects can usually be successfully managed; more than that usually stretches the organization too much.
On the surface all organizations tend to think they can handle any portfolio mix; but high-risk projects (if they are to be successful) demand much more management time and attention and this dilutes the time available for other projects and, of course, ongoing operations.
You need to be monitoring the leading indicators of failure. While these are the accountability of the governance team to monitor and manage they sometime ignore the ‘red flags’ hoping that they will go away in time (as this is what their project manager tells them). You need to be taking action to preserve the value of each project to maximize the actual value delivered.
This is all to ensure the organization gets the ‘best bang for its bucks’.
Redefining your PMO role
To perform these roles you need to determine which of the six PMO roles you will focus on. Some roles may be seen as necessary but are not valued. Focusing on these low-value roles can put your long-term survival at risk. Whereas focusing on other roles can ensure you are seen to be a major contributor to the organization’s success.
You first need to understand these roles (using, say, the TOP Portfolio Management Value Pyramid model) and choose which roles you will focus on. NB This is a choice, not a maturity model. You don’t need to ‘mature’ to be successful as a Strategic PMO, you can make the choice, equip yourself with the relevant tools, techniques and processes, and be seen to be highly successful and of high value to the organization. The TOP Portfolio Management Value Pyramid model with its six primary roles explains how.
Each of the six PMO roles is discussed as part of the TOP Strategic PMO Master Class - see below.
Tracking the strategy’s execution
70% of strategies are not fully delivered. Some may be started and never completed or are so severely compromised that the strategy is effectively not delivered.
Many strategies are not delivered as they disappear from sight. Organizations are unable to track via the portfolio their strategy’s execution and which projects are delivering what. This is where the Strategic PMO can shine—by clearly measuring, tracking and reporting the strategy's execution and delivery.
An effective Strategic Contribution Assessment Tool can enable you to measure at the detail level the strategic contribution of each project. Then you can track each project’s progress to track the delivery of its strategic contribution.
Where compromises and scope changes are made, the impact of these changes on the project’s strategic contribution and value can be assessed and the strategy’s execution adjusted.
As projects and programs are delivered their actual contribution to the strategy’s delivery can be measured and reported. Now, often for the first time, your organization can be in full control of its strategy’s execution.