Is the concept of the PMO obsolete?
Just read this eye opening report from the Projects At Work site on the Hackett Group’s research results on the decline of the PMO. There’s a quote from the principal researcher named John Reeves, which could read like a summary of my conclusions on the reality check needed regarding the centralization of the PMO that I posted back on September 2012:
“Since the recession, many companies have simply given up on PMOs. And with good reason,” said The Hackett Group IT Advisory Practice Leader John Reeves. “The way most companies implement PMOs, they have become large bureaucratic organizations with myopic viewpoints. Too often they focus on practices that simply create a drag on the organization, facilitate design weaknesses, increase complexity and drive up maintenance and support costs. It’s a shame, because the paradox is that our research also shows that when used properly, PMOs can be exceptionally effective at driving quality and reducing complexity. That’s why they’re a key best practice at virtually every world-class IT organization we’ve studied.”
I’ve been involved with a few of these kinds of PMOs and I’ve yet to see it at the world class level discussed by Mr. Reeves, though that’s not saying they don’t exist. I just haven’t personally witnessed one, though to be fair I’ve seen some instances of it working well in certain situations especially if there was sound executive support.
The rest of the report outlines some pretty dismal results and statistics regarding the decline of the PMO in the IT sector (where currently it is utilized the most):
The Hackett Group’s research found that companies with low PMO utilization actually see 32 percent lower operating costs than companies with high PMO utilization.
The study also found that high PMO utilization did not drive better business outcomes or project delivery performance. Companies with high PMO usage showed virtually identical ability to deliver projects on-time or on-budget. They also showed virtually identical ability to achieve anticipated benefits, achieve stated ROI targets, and deliver to specifications.
PMO usage has been on the decline since 2009, the study also found. The percent of infrastructure projects managed by PMOs has dropped by over 20 percent, while its use for application projects has dropped by nearly 18 percent. Overall, only 53 percent of all IT projects are currently managed by PMOs, down nearly 12 percent points since 2009. The size of PMOs has also been shrinking, according to The Hackett Group’s study, with the average number of FTEs dedicated to PMO activities falling by 41 percent from 2009 to 2011. On a relative basis, FTEs dedicated to PMO activities dropped from 6% of total IT staff in 2009 to just 2% in 2011.
So what this report shows is that PMO’s with high utilization rates actually increase costs, did not produce better business outcomes or project delivery and has been on the decline since 2009. So why even bother with implementing a PMO?
The report outlines 4 key strategies to buck this trend which includes:
- Centralized IT demand management
- Accountability for business benefits
- Standardization of processes and architecture
- Program and project reviews
According to the Hackett Group, these “practices enable world-class IT organizations to effectively utilize PMOs to drive IT complexity reduction, improve ROI, and more frequently deliver projects on time and on budget.” Though the report gives some general statistics claiming that PMO’s that have adopted the 4 strategies are four times as likely to achieve their ROI (I’d like to know what these are) targets as well as “63 percent more likely to deliver projects on time and on budget”, it is very light on these details unlike the details about the dismal results and decline of the PMO’s.
Though you’d have to take the report with a grain of salt since they are an IT consulting and advisory group that will no doubt come in to help your organization achieve the four strategic buck busting trends, my own experiences, as well as anecdotal evidence and speaking personally with real world project and portfolio managers from within and outside organizations I’ve been involved with, seem to indicate that the inability of the PMOs to realize their benefits and their gradual decline over the years is real.
So what’s the solution? I’m not sure, but I think the first step is to realize that the traditional model of the PMO needs to get seriously reevaluated, revised, then field tested to make sure it works. It will be interesting to see how this evolves.