My colleague Jason Busch just penned a fine piece on PMOs in procurement, and since I have some experience in this area, I thought I would weigh in.
Project Management Offices (PMOs) sound great theoretically: better project visibility, coordination, standardization, resource utilization, etc. to optimize all the project activity going on. Great, so, let’s learn about PMOs where they’re most implemented and then adopt those best practices: IT. One would think that in areas such as IT where PMO's have been implemented more than anywhere else, we could look there to understand the benefits. Unfortunately, based on a study from Hackett last year, PMOs are on the decline in IT and, as currently implemented, destroy value by introducing bureaucracy and cost. Of course, as Hackett knows all too well, it’s much easier to measure efficiency than effectiveness, and perhaps there are some effectiveness benefits here for procurement – especially if implemented well.
So, why should we pursue PMOs in Procurement? There are a many reasons (and a few caveats):
- We used to measure utilization of a PMO approach in the Hackett procurement benchmarks and nearly every single world-class procurement organization does this to some level compared to about half of everyone else. It’s a proven approach – even if the value of PMOs is not low level “death by Gantt chart” exercises to track project execution, but rather, to have visibility into planned activity to ensure alignment to performance objectives and transformation activities. The best PMOs are in fact TMOs (transformation management offices)
- PMOs are fundamentally part of a Procurement CoE (Center of Excellence) for performance management. In fact, PMOs could rightly be called Procurement/Performance Management Offices because they should ensure that procurement projects (i.e., procurement resources and associated investments) are tied back to procurement objectives and stakeholder objectives.
- The visibility of planned projects allows better coordination between them and also supports aggregating them to create a more compelling ROI
- Stakeholders have their own project portfolios, so why not tie into them? Project portfolio management is not just for IT, and many organizations use the tools and techniques in areas such as risk management, continuous improvement, etc. So, if IT is using it for their forward visibility in project planning, it’s a no-brainer to align to their activities in order to get better visibility of planned spending. This also aligns to the previous point. If IT is driving ERP/eProcurement upgrades, these are funded windows of opportunity to latch on to for other transformation activity
- You likely already do it now. Even if you use spreadsheets or simple functionality on eSourcing project tracking, you can extend that functionality to include transformation projects that are about capability building or other strategic reasons. I know a progressive chemicals firm that ties - not just aligns - performance targets like savings down to an employee level, but also the profit at risk from the direct materials categories/suppliers they’re responsible for. You don’t want junior people running your highest impact spend categories… or projects.
- Basic project planning, coordination, and visibility creates the need for discipline and culture of execution. Procurement organizations get themselves in a lot of trouble for biting off more than they can chew. The visibility from PMOs helps force the discussion on prioritizing scarce resources. This culture of execution also helps reinforce the professionalization of procurement and enhance its brand to the rest of the enterprise
- The technology for supporting PMOs is fragmented and so is the Project and Portfolio Management (PPM). Some functionality will sit resident within some of the procurement technology vendors, but invariably there will be other tools sitting out there in other groups.
I am having another “back to the future” moment. 10 years ago I spent a lot of time evangelizing the importance of PPM (not parts per million) in procurement before any of the vendors had functionality here (I think Ariba was the first with Ariba Category Workbench – not very complex – just adding a project ID and some metadata to sourcing activities), and I remember talking to Steve Sharp, the then-CEO of Frictionless Commerce, about this area, and he subsequently left to become the CEO of PPM vendor PowerSteering, which must be one of the worst named vendors of all time (although Pool4Tool can’t be far behind) – but still an interesting one that has been used in many business areas. Thankfully, they just changed their name and got acquired by a larger firm named Upland, but this isn’t a story about PPM software vendors, it is one about a different PPM: Procurement Performance Management. Planning and tracking programs/projects are absolutely fundamental to realistic procurement performance planning (and capability planning) – and to ensuring execution against those objectives on a continuous basis. This strategic aspect of PMOs is the important part, not low-level MS-project wielding bureaucrats justifying their existence.
Sorry for the rant. Like Tina Turner's lyric from Proud Mary, I "never do anything niiicccce ... and easy."
But I do feel better. If you have some experiences or perspectives on PMOs, please feel free to share in the comments section.