Businesses often have many pressing initiatives running in parallel. The need for them to be organised is universal, although the shape, remit and skills needed in a portfolio are highly nuanced depending on the individual business. So, creating a portfolio management office (PMO) requires upfront design attention. In this article, we outline the key design principles for creating or redesigning a PMO to meet changing business needs.
EIGHT CRITICAL DESIGN PRINCIPLES
There are eight critical principles to consider when designing a PMO. Each principle has a sliding scale to highlight the reality of each decision for your business.
1. Focus and remit
Focus and remit should be the starting point when discussing your PMO needs, as it’s the area that will require the most strategy and senior alignment to secure the future of the PMO. You should align with senior management before this discussion.
PMOs will often be going through large-scale changes such as mergers, new regulations and technology changes, creating a turbulent market. Therefore, most companies are likely to sit towards the left of the scale.
Design tip: Define what the design team view as ‘profound’ change and ask for examples where possible. Clear alignment at this stage will help when discussing scope and demand management later in the process.
2. Breadth of scope
The PMO breadth of scope is less subjective. Does your business want the PMO to impact everything (large and have varied skills in the team) or focus on projects and programmes that are categorised as high value and critical (smaller but directly involved with function and enterprise leadership)? A common consideration here will be how visible the current project and programmes will be to the rest of the business. The team can then understand the baseline if a broad scope is selected. We often see delivery teams focused on being closer to the strategic, high-value outcomes with a light touch on the full delivery impacts to the business.
Design tip: Nominate a member of the design team to define the criteria for ‘high value’. This will be a useful document when discussing PMO scope creep.
A PMO can and often will outlive the projects and programmes within it, but for certain businesses PMOs will disperse after the current portfolio of work is complete. Timespan is closely linked to the type of change your business is expecting – complex initiatives take time and will therefore require support for longer.
At this stage, you should discuss how long your business wants to have a standalone PMO function. This may highlight that the timespan and scope appetite do not match and you will need to discuss the necessary trade-offs.
Design tip: Be aware of optimism bias. We often underestimate the time required. Good practice is to look for examples of similar portfolios and initiatives, and then map against these time periods.1
4. Demand management
Demand management is often a pain point of functioning PMOs. It can be an area where the quality of input differs and scope creep appears. This role is very important in achieving design principles one to three, therefore you must be clear with intent.
You can create good processes in the front end with the use of scope templates and design review boards. This allows the PMO to focus on partnering with the business, while still having strong ownership within the business-as-usual function.
Design tip: Assemble a diverse team to reflect the fact that your portfolio is likely to involve a variety of stakeholders. You will get an accurate view of capabilities and understand the maturity gap that the PMO needs to fill.
5. Performance measures
Performance measures have started to move in line with the balanced scorecard approach, driven by much greater access to technology. However, measuring the portfolio against its value is a different and difficult task. The more traditional approach to the left is often more suited to the smaller, timebound PMOs. Larger, long-term PMOs will have a much better opportunity to start moving the scale to the right.
Design tip: Show examples of where value is mapped to your business. If there are not multiple examples, you will be a pioneer and should communicate this to senior leadership.
6. Resource delivery model
The internal team model works better with steadier state portfolios – this avoids demand swings. In contrast, a portfolio run by external parties is rare and would indicate a need to deliver a highly specific portfolio. At this stage, you should think about timebound elements of delivery and other changes in the macro environment.
Design tip: Use integrated teams where possible. Teams with highly integrated goals are often the highest performing.2
7. Enterprise change management
The impact of a portfolio on enterprise change management is highly dependent on whether your business is willing to use resource on embedding change. Often a stronger business as usual embedding presence is preferred, leaning towards good and clear change management in delivery stages. In this environment, local change is managed by impacted parties.
When designing how change management is handled, the portfolio needs to have a clear view on the capability of your business to manage change. Any nuances may mean that certain initiatives are handled better than others, so a blended change approach may be pitched.
Design tip: Consider the current change management processes within the design team’s area of expertise and discuss how local change has been handled. A good question to ask is: ‘Do you know the major impacts to your function this quarter?’.
8. Roles and skills
The roles and skills of a PMO are products of the preceding design choices. At this final stage, the answer will not be a full capability matrix, but the design group will understand the level of complexity in the portfolio, and therefore start to create a view of current and future capabilities.
Design tip: Create a record of the different delivery methodologies within the portfolio (agile, waterfall and product). This will help you understand the balance of skills required as methodologies set standards in areas including reporting and governance.
TAKE A CUSTOMISED APPROACH
Designing a PMO is not a cookie-cutter exercise. The design principles must first be understood in detail before setting up or altering a PMO. This design alignment technique should be commonplace in operating model design, but there are also significant benefits when implemented for a PMO.
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