Post on 05-Mar-2015
transcript
PMO Executive Council™
Research Teleconference18 June 2008, 12 p.m.–1 p.m. EDT
Teleconference
State of the PMO Function
� Featuring:
• Current PMO Trends
• Priorities for 2008–2009
Copies and CopyrightAs always, members are welcome to an unlimited number of copies of the materials contained within this handout. Furthermore, members may copy any graphic herein for their own internal purpose. The Corporate Executive Board requests only that members retain the copyright mark on all pages produced. Please call the Publications Department at +1-571-303-4444 for any help we may provide.
The pages herein are the property of the Corporate Executive Board. Beyond the membership, no copyrighted materials of the Corporate Executive Board may be reproduced without prior approval.
Legal CaveatThe PMO Executive Council has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from many sources, however, and the PMO Executive Council cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the PMO Executive Council is not engaged in rendering legal, accounting, or other professional services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither the Corporate Executive Board nor its programs are responsible for any claims or losses that may arise from a) any errors or omissions in their reports, whether caused by the PMO Executive Council or its sources, or b) reliance upon any recommendation made by the PMO Executive Council.
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Road Map for Today’s Discussion
PMO Functional Trends
The Ascendance of the EPMO
Pressure to Boost Resource Productivity
Heightened Interest in Benefi ts Realization Tracking
4PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Emergent PMO Trends
Source: PMO Executive Council research.
PMO leaders are demonstrating a strong interest in growing their value perimeter, pushing to move beyond delivery of functionality to delivery
of benefi ts, and become a center of excellence for resource management…
PMO Competencies of Highest Importance and Least Effectiveness
PMO Executive Council Maturity Diagnostic
Average Maturity Gap
Maturity Gap(Importance—Effectiveness)
Impo
rtan
ce
Low
High
HighLow
Portfolio (Re)Prioritization
Portfolio ResourceMonitoring
Benefi ts Assessment and Tracking
Portfolio Data Collection and Reporting
Project Manager Performance Assessment
Project Performance Reporting
End-User Adoption Readiness Assessment
Project Staffi ngPMO Mandate Defi nition
Project Manager Incentives
Project Manager Coaching and DevelopmentProject Selection
Vendor and Outsourcing Management
Methodology Training
Organizational StructureProject Manager Hiring
Project Management Tools and Methodology
PMO Performance ReportingStakeholder Partnership
…while the Enterprise PMO model continues to grow in popularity
PMO Executive Council EPMO Cohort
As a Percentage of PMO Executive Council Membership
2006
2007
2008(E)
20%
30%
40%
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Top of the Priority List for Second Half of Year
State of the PMO Function
Source: PMO Executive Council research.
Enterprise coordination for large-scale programs
Improving clarity on returns on project investments
Anticipating and mitigating project resource bottlenecks
Challenges to PMO Success
Challenge
Current TrendPressure to Boost
Resource ProductivityThe Ascendance
of the EPMOHeightened Interest in
Benefi ts Realization Tracking
321
6PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Road Map for Today’s Discussion
PMO Functional Trends
The Ascendance of the EPMO
Pressure to Boost Resource Productivity
Heightened Interest in Benefi ts Realization Tracking
7PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
State of the EPMOEPMOs maintain authority over large budgets…
EPMO Budget Managed, 2006–2007
Percentage of Companies
The Ascendance of the EPMO
2006
2007
Under $500,000
$500,000–$1
Million
$1 Million–$5 Million
$5 Million–$10 Million
More Than$10 Million
14%
5%9%
14%
32% 32%
9%14%
36% 36%
Eighty-two percent of EPMOs manage budgets greater than $1 million, up 5% from 2006.
n = 22.
…and report beyond the IT function
EPMO Reporting Relationships
Percentage
31%
23%
15% 15%
8% 8%
CIO/CTO/Governance
COO or Operations
CFO or Finance
Functional Heads
CEO or Head of Subsidiary
Strategy
Sixty-nine percent of EPMOs report outside of IT.
n = 26.
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The Enterprise PMO
Governance Activities and Accountabilities
Portfolio Planning Process and Methodology Governance Capacity Planning
Creating the Portfolio Management Framework Developing Resource Management Processes and Standards Monitoring Key Delivery and Quality Metrics
Aligning with Business Partners Tracking and Reporting Key Metrics to Business Partners Reconciling Skills Profi ciency with Role Requirements
Setting Allocation Levels Across Portfolio Asset Classes Reviewing Cross-Functional Projects at Stage-Gates (Re)allocating Resources to Projects
Screening Business Ideas for Strategic Fit Selecting a Resource Management Tool Estimating Demand
Developing Business Cases Enforcing Resource Management Processes and Standards
Defi ning Project Requirements Managing Multiple Vendors
Prioritizing the Portfolio
Owned: The PMO has complete decision-making authority for this activity
Consulted: The PMO infl uences decisions with analysis and recommendations
Source: PMO Executive Council research.
Shared Resource Pools
Business Unit PMO
Functional PMO
Infrastructure
EPMO
Applications and Operations Support
Architecture
IT Non-IT
IT
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Maturing Toward Business ValueEvolution in EPMO Metrics
PMO Executive Council Analysis
Source: PMO Executive Council research.
HighLow
Process Inputs
Business Outcomes
Focus of EPMO
Activities
Relative Cost of Measurement
Standardizing Process
Sample Metrics:• Percentage of PMs using standard methodology• Percentage of PMs attending methodology
training classes• Percentage of BUs using standard PM job
descriptions
1
Assessing Portfolio Returns
Sample Metrics:• Portfolio ROI• Dollars of generated revenue• Dollar effi ciencies gained• Cost avoided from automation efforts• FTE Savings
3
Delivering Projects Successfully
Sample Metrics:• Percentage of sponsors satisfi ed
with delivered projects• Percentage of projects delivered on-time• Percentage of projects delivered on-budget• Rework as a percentage of total project work
2
Reporting Maturity Curve
With Sincere Appreciation
CISCO SYSTEMS, INC.
Download the EPMO Metrics and Reporting Toolkit at www.pmo.executiveboard.com
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Road Map for Today’s Discussion
PMO Functional Trends
The Ascendance of the EPMO
Pressure to Boost Resource Productivity
Heightened Interest in Benefi ts Realization Tracking
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View from the Corner Offi ce
No ExcusesBusiness tolerance for delivery lapses is at an all-time low…
Current Business Customer Expectations
Percentage of Respondents
…just as the traditional options for accelerating delivery are no longer available
Contract Employees
Percentage Change in Headcount
Just Get It All Done“Input prices are at historic highs, competition is brutal, and our margins are under tremendous pressure. To survive, we all have to fi nd ways to deliver more with fewer resources. So I don’t want to hear about our limited capacity for new projects—I don’t care how you do it, I need it done.”
Business Unit GMServices Company
Get It Done for Less“I don’t care what you do, just do it for 20% less!”
CFOPharma Company
n = 33. n = 145.
Very Low Tolerance for Projects Not
Delivered on Time and Budget
Increasing Pressure to Accelerate
Speed to Market2006–2007
2007–2008
(7.45%)
14.13%89%
67%
Source: PMO Executive Council research. Source: CIO Executive Board research.
12PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Pitfalls to Avoid
Source: PMO Executive Council research.
Three Myths About Increasing Resource Productivity
The Technologist
1010101010101010
Tools are the Solution!“Once we fi nish our PPM
implementation, we’ll be able to…!”
2
Tools are Necessary not Suffi cient
What Tools Can’t Do
Secure executive support
Identify effective resource management processes
Ensure data quality
The Empire Builder
Control Over Resources is Key“If only I could get more
control over resources…”
3
More Visibility not More Control
Projects That Cut Across Business Units
Percent of Projects in Portfolio
n = 60.
74%
26%
Single Business Unit
Two or More Business Units
The Process Hound
More Process Adoption is Better“If people followed our
methodology more consistently…”
1Drivers of PM Effectiveness
1. Ownership and Commitment 2. Learning Agility 3. Risk Management . . . 7. Process Adherence
n = 65.
More Methodology Does Not Mean More Productivity
The Myth The LessonThe Reality
13PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
The Size of The Prize
Source: PMO Executive Council research.
Reducing Resource Bottlenecks: A $20 Million Cost Savings Opportunity
Implementation Guide in Appendix.
Cost(Millions
of Dollars)
Portfolio Budget
(A) Lost Time
to Respond
(C) Resource
Over-Utilization/Burnout
(B) Resource Ramp-up
(D) Unplanned
Staff Augmentation
Portfolio Cost
(H) Unplanned Attrition
(G) Rework
(F) Understaffed Maintenance
(E) Unplanned
Outsourcing
Impact of Resource Bottlenecks on Portfolio Cost*
$2.1M
$1.3M
$2.7M
$4.0M
$4.1M
$3.1M
$17.3M
$2.3M
$0.2M
Rework and Unplanned Attrition
$2.5M
Lost Productivity on Ongoing Projects
$6.1M
Lost Productivity
on Completed Projects
$3.1MUnplanned Staffi ng to Resolve Bottlenecks
$8.1M
$100M$100M
* Costs are based on $100 million portfolio and two bottlenecks per project per month .
Key Drivers of Ineffective Resource Management
Inability to Anticipate Resource Bottlenecks
($13.3 Million)
Inability to Quickly Relieve Bottlenecks
($6.5 Million)
1
II
III
IV
VI
V
33%67%
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Redefi ning Resource GovernanceBoosting Resource Productivity to Deliver High-Quality Projects
PMO Executive Council™
2008 Meeting Series
Executive Retreats for PMO Principals
9–10 September, Chicago, Ill.
21–22 October, Palo Alto, Calif.
Designed to allow peer-level interaction among PMO leaders, the executive retreat meetings are reserved for the seniormost PMO executive at member institutions.
Leadership Briefi ngs for PMO Staff
7 October, Chicago, Ill.
4 December, Washington, D.C.
Designed for key PMO staff, leadership briefi ngs expose high-performing staff and emerging PMO leaders to select executive retreat practices in a one-day session.
Executive Retreat for EPMO Principals
31 July, New York, N.Y.
Registration InformationTo register for a meeting, visit our Web site at www.pmo.executiveboard.com and click on the Meetings and Teleconferences tab. Feel free to contact the PMO Executive Council with additional questions either by e-mail at PMOExecutiveCouncil@executiveboard.com or by phone at +1-866-913-8101.
As with all PMO Executive Council meetings, there is no charge for attendance.
R.S.V.P.: PMO Executive CouncilE-Mail: PMOExecutiveCouncil@executiveboard.com
15PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Road Map for Today’s Discussion
PMO Functional Trends
The Ascendance of the EPMO
Pressure to Boost Resource Productivity
Heightened Interest in Benefi ts Realization Tracking
16PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Migrating to Benefi ts Tracking Partnership
29%
26%
23%
19%
3%
PMOs seek to facilitate business case realization tracking…
What Is Your PMO’s Role in Tracking Business Case Realization?
2008 Council Survey
…to drive a multitude of expected benefi ts
What Is the Main Benefi t That Your Organization Expects from Improving Business Case Realization Tracking?
2008 Council Survey
Current Role
Desired Role
Ability to Drive Business Accountability for Benefi ts Realization
Ability to Focus Senior Executive
Attention on Harvesting the Full Benefi ts of Project
Investments
Better Quality of Information
for Project Selection Decisions
Visibility into the Overall Returns of the Whole Portfolio
Improved Estimation
Accuracy via Historicals and Retrospectives
47%
3%
19%
3%
29%
73%
5%
20%
Lead the Tracking
Collaborate with Finance Staff (or
Another Function) to Help Facilitate
the Tracking
Merely Provide Data
Source: PMO Executive Council research.
No Involvement
17PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Supplier-Facing Employee Facing Customer Facing Infrastructure
Standard metrics defi nitions ensure
project comparability
Map provides a holistic view of the
entire portfolio
Portfolio-Level Business Value MapIntel’s Value Dial Map
Source: Intel Corporation; CIO Executive Board research.
Supplier-Facing Employee Facing Customer Facing Infrastructure
Metric Description
Cash CycleWorking Capital Reductions
1. Days of Inventory $M/Day Balance Sheet Impact [$M per Year] x x x 0%
2. Days of Receivables $M/Day Balance Sheet Impact [$M per Year] x 2%
Effi ciencies
Expense Reductions
3. Headcount Reduction Number of HC Reduced or Avoided x Avg Burden Rate x x x x x x x x 4%
4. Headcount Productivity 50% x (Number of HC Reduced or Avoided) x Avg x x x x x x x x x x 9%
5. Headcount Turnover $ per Turnover Avoided x x x x x x x 6%
6. System End of Life Incremental Dollar Cost of Displaced System per Each Actual Incident x x x x x x x x x x x x x 3%
7. Materials DiscountsDiscounts from 1) Contractual Early Pay; 2) Reverse Action Lower Prices; 3) Supplier Consolidation/Volume
x 7%
8. Hardware/Software Avoidance
Actual Hardware and Software Cash Avoidance from Infrastructure Decisions, Consolidations
x x x 1%
9. Risk Avoidance Intel Exposure x Probability of Occurrence x x x 1%
10. Other Cost Avoidance Actual Cost Avoided from Unique Automation Efforts x x x x x x x x x x x x x 3%
Cost of Sales 11. Unit Cost Avoidance Actual Cost Avoided from Factory Automation Efforts x x 0.5%
12. Factory Uptime Ex: $/hr of Factory Downtime Avoided (Unconstrained)/ $/hr (Constrained) x x 1.5%
13. Reserves$ per Each % Point of Reserves Reduction Over and Above Lower Inventory Savings from DOI Impact
x x 7%
Opening Markets
Profi t Margin 14. Time-to-Market $/Week x x 10%
15. Open New Markets Increased Volume x Appropriate ASP for Market and Product x Appropriate Margin Rate x 15%
16. Opt Existing Market Incremental ASP or VOI x Appropriate Margin Rate x x 5%
17. Cross-Selling Cross-Selling Products of Multiple Divisions and Acquisitions x x 12%
VOC 18. Voice of the Costumer Qualitative VOC Score x x x x x x x x 13%
Project Type
Benefi ts
Standard metrics defi nitions ensure project comparability.
Map provides a holistic view of the entire portfolio.
Project benefi ts are expressed in business terms.
Granular drivers of business value are identifi ed for each project type.
321
4
Inve
ntor
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anag
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s
Plan
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Sys
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Mat
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rocu
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Syst
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Del
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Tech
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D
ocum
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App
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Empl
oyee
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Fina
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Sto
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Prog
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Ord
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anag
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C
usto
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Sup
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Con
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of P
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Info
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Upt
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Relia
bilit
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esig
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Rem
ote,
Dow
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ire
Mer
gers
and
Acq
uisit
ions
TotalValue
TowardDial*
Value standardization across BUs enables the portfolio’s contribution to each value dial to be tallied
* Data are illustrative.
Assessing Portfolio Returns
5
Download Intel’s Finite Enterprise Wide Value Metrics Case at www.pmo.executiveboard.com
18PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Project Request # 1234 Date of Assessment:
Project Name: CRM
First Benefi ts Assessment: 05/15
Project Sponsor: Brian Scott
IT Project Manager: Hannah Reed
Benefi ts Assessed By: IT Finance
Responsible for Benefi ts: Jack Smith
Hard Benefi ts Benefi t($ or Hours)
Confi dence/Probability (Circle One)
Margin $1,200,000 (100%) (90%) (60%) (30%)
Sales $1,000,000 (100%) (90%) (60%) (30%)
Cost Reduction $500,000 (100%) (90%) (60%) (30%)
Working Capital Reduction ($) $400,000 (100%) (90%) (60%) (30%)
Soft Benefi ts (Circle One)
Productivity (hours saved) 1000 Hours (100%) (90%) (60%) (30%)
Government/Legal Priority: High Medium Low
External Customer Requirement
Visibility: High Medium Low Customer: Major Non-Major
Repair/Replace (Includes Tech Services Infrastructure)
Major Risk Medium Risk Low RiskVendor Support Drop Platform Elim Productivity Cost Reduction
Armstrong ranks proposed projects… …and segments the portfolio to deliver scrutiny proportional to project value…
…with a controller certifying the benefi ts of the top 25 to ensure they accurately refl ect the impact of external factors
Benefi ts Self-Assessment and Controller Audit
Benefi ts Self-Assessmentand PMO Review
Benefi ts Self-Assessment
Benefi tsOne-time $500,000Annual $50,000__________________________Total Benefi ts to date $550,000
CostsOne-time $800,000Annual $100,000__________________________Total costs to date $900,000
Benefi ts Adjustment
1. Seasonality (1%)
2. Infl ation 2%
3. Price Increase 1%
4. Price Mix 3%
Adjusted Benefi ts = 5%
Internal Assessment External Assessment
= High = LOW
80+ hours(575 Projects)
Most Valuable (25 Projects)
< 80 hours(900 Projects)
Area Project Financial Return (40%)
Business Unit Impact (30%)
Probability of Success (30%) Rank
Logistics Project 1 1
Fulfi llment Project 2 2
Marketing Project 6 29
HR Project 7 30
Project Request # 1234 Date of Assessment:
Project Name: CRM
First Benefi ts Assessment: 05/15
Project Sponsor: Brian Scott
IT Project Manager: Hannah Reed
Benefi ts Assessed By: IT Finance
Responsible for Benefi ts: Jack Smith
Hard Benefi ts Benefi t($ or Hours)
Confi dence/Probability (Circle One)
Margin $1,200,000 (100%) (90%) (60%) (30%)
Sales $1,000,000 (100%) (90%) (60%) (30%)
Cost Reduction $500,000 (100%) (90%) (60%) (30%)
Working Capital Reduction ($) $400,000 (100%) (90%) (60%) (30%)
Soft Benefi ts (Circle One)
Productivity (hours saved) 1000 Hours (100%) (90%) (60%) (30%)
Government/Legal Priority: High Medium Low
External Customer Requirement
Visibility: High Medium Low Customer: Major Non-Major
Repair/Replace (Includes Tech Services Infrastructure)
Major Risk Medium Risk Low RiskVendor Support Drop Platform Elim Productivity Cost Reduction
Project Request # 1234 Date of Assessment:
Project Name: CRM
First Benefi ts Assessment: 05/15
Project Sponsor: Brian Scott
IT Project Manager: Hannah Reed
Benefi ts Assessed By: IT Finance
Responsible for Benefi ts: Jack Smith
Hard Benefi ts Benefi t($ or Hours)
Confi dence/Probability (Circle One)
Margin $1,200,000 (100%) (90%) (60%) (30%)
Sales $1,000,000 (100%) (90%) (60%) (30%)
Cost Reduction $500,000 (100%) (90%) (60%) (30%)
Working Capital Reduction ($) $400,000 (100%) (90%) (60%) (30%)
Soft Benefi ts (Circle One)
Productivity (hours saved) 1000 Hours (100%) (90%) (60%) (30%)
Government/Legal Priority: High Medium Low
External Customer Requirement
Visibility: High Medium Low Customer: Major Non-Major
Repair/Replace (Includes Tech Services Infrastructure)
Major Risk Medium Risk Low RiskVendor Support Drop Platform Elim Productivity Cost Reduction
Trust, but Verify
Case Excerpt: Selective Benefi ts Audit
Source: Armstrong World Industries; PMO Executive Council research.
Download Armstrong World Industries’ Integrated Benefi ts Tracking Case at www.pmo.executiveboard.com
19PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Key Learnings for Benefi ts Realization Tracking Success
Without a mechanism to track benefi ts realization post–project implementation, fi rms struggle to understand the value of the portfolio and, consequently, the value of the PMO. While PMOs are not necessarily the logical place to locate responsibility for conducting benefi ts assessments, PMOs can play an important role in facilitating the execution of the assessments.
Key Insights
Drive business accountability for benefi ts realization—Set an expectation that sponsors will self-assess benefi ts realization for all projects and partner with IT Finance to drive standardized benefi ts assessment for the highest value projects.
Create a consistent vocabulary for project-related benefi t measures—Selectively scrutinize reported benefi ts for the most valuable projects in the portfolio to avoid double-counting. Review project outcomes not for IT’s contribution, but for the total business value a project provides.
Use benefi ts tracking as both a carrot and a stick—Use status reports on project benefi ts realization to focus executive-level discussions on how to realize project value when barriers are outside the PMO’s control. The reports may also be used to track estimation success to coach executives on improving estimation.
Start with the end in mind—Establish the metrics plan at the outset of the business case to identify which metric(s) will be used to value the project, set a baseline for measurement, and determine what data must be collected, and by whom.
Leverage Finance’s expertise—Partner with the fi nance department to enhance credibility of reported benefi ts, and adjust for macroeconomic factors that may obscure true benefi ts realization.
Simplify participation requirements and expectations—Design a benefi ts realization process that is easy to complete at the project team and project sponsorship levels to maintain executive engagement.
1
2
3
4
5
6
20PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Top of the Priority List for Second Half of Year
State of the PMO Function
Source: PMO Executive Council research.
Improving clarity on returns on project investments
Anticipating and mitigating project resource bottlenecks
Challenges to PMO Success
Challenge
Current TrendPressure to Boost
Resource ProductivityThe Ascendance
of the EPMOHeightened Interest in
Benefi ts Realization Tracking
32Enterprise coordination for large-scale programs
1
21PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Appendix
� Resource Bottleneck Impact Calculator
22PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Appendix
� Resource Bottleneck Impact Calculator
� List of Assumptions, Parameters, Inputs, and Outputs
� Scenario Analysis Results
� Key Takeaways
Resource Bottleneck Impact Calculator
23PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Resource Bottleneck Impact CalculatorInputs and Outputs
Inputs
1. Portfolio Characteristics
a. Total new development project portfolio budget = $100M
b. Total number of projects in the portfolio = 220
c. Portfolio Composition by Project Size: 55% Small projects; 25% Medium projects; 20% Large projects
d. Cost of a project by project size (small, medium, large) = $250K small; $500K medium; $1M large
2. Average number of bottlenecks per project per month = 2
Outputs 1. Itemized list of costs due to resource bottlenecks in the portfolio. Cost of:
a. Lost time to respond
b. Productivity loss due to resource ramp-up time
c. Productivity loss due to resource heroics (Over-Utilization/Burnout)
d. Unplanned staff augmentation
e. Unplanned outsourcing
f. Unplanned maintenance”
g. Cost of rework—additional maintenance due to break-fi x caused by rework resulting from bottlenecks
h. Cost of unwanted staff attrition
2. Relative size of costs incurred due to resource bottlenecks in the portfolio
3. Size of on-budget deviation for the portfolio
Implementation Guide
24PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Resource Bottleneck Impact CalculatorAssumptions and Parameters
Assumptions 1. Bottleneck Frequency
a. Number of bottlenecks encountered per project per month = 2
b. Maintenance bottlenecks as a percentage of the total number of bottlenecks per project per month = 10% 2. Bottleneck Severity
a. Bottleneck size in FTEs = 1 FTE
b. Number of weeks an FTE is not utilized due to a bottleneck = 1 week
c. Number of weeks it takes an FTE to ramp up to a new assignment = 3 weeks
d. Number of weeks it takes to complete a bottlenecked task once an FTE is assigned to it = 4 weeks
e. Probability that bottlenecked resource is a non-commodity resource = 0.67
3. Labor Costs to Relieve Bottlenecks
a. Fully loaded annual cost of non-commodity internal FTE = $100K
b. Fully loaded annual cost of commodity internal FTE = $75K
c. Fully loaded annual cost of non-commodity outsourced FTE = $55K
d. Fully loaded cost of non-commodity outsourced FTE = $40K
e. Premium for rapid staff augmentation = 5% of fully loaded annual labor cost
f. Premium for rapid outsourcing = 10% of fully loaded annual labor cost
Parameters 1. Number of FTEs on a team by project size (small, medium, large) = 5 FTEs small; 12 FTEs medium; 20 FTEs large
2. Duration of a project by project size (small, medium, large) = 24 weeks small; 36 weeks medium; 48 weeks large
3. Probability and cost impact of applying each of the following techniques for relieving a bottleneck:
a. Obtain outsourced resources = 0.25
b. Augment staff using contractors = 0.25
c. Reallocate tasks to staff within project = 0.25
d. Re-sequence tasks within a project = 0.25
4. Productivity of resource who is ramping up: week 1 = 30%; week 2 = 50%; week 3 = 70%
5. Productivity of rest of the team during ramp-up time: week 1 = 120%; week 2 = 70%; week 3 = 55%
6. Unwanted attrition rate = 4% for productivity loss of higher than 2%; 2% for productivity loss of 1%-2%; 1% for productivity loss of less than 1%
7. Percent of rework generated per bottlenecked FTE for duration of time it takes to complete a task = 10%
8. Additional frequency of bottlenecks due to unplanned maintenance per month = 25%
Implementation Guide
25PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Resource Bottleneck Impact CalculatorEstimation accuracy, team productivity, and impact of bottleneck-relief actions on portfolio costs
Productivity of Team Over Time
Cost Categories Due to Not Anticipating or Quickly Relieving Bottlenecks
Lost Productivity Unplanned Staffi ngf. Unplanned Maintenancea. Lost Time
to Respondb. Resource
Over-Utilizationc. Resource Ramp-Up
d. Unplanned Staff Augmentation
e. Unplanned Outsourcing
Tactics to Relieve
Bottlenecks
1. Obtain Outsourced Resources
2. Augment Staff Using Contractors
3. Reallocate Tasks to Staff Within Project
4. Re-Sequence Staff Within a Project
Source: PMO Executive Council research.
Average Productivity of Additional Resource 30% 50% 70%
55%70%120%Average Productivity of Rest of the Team
Productivity (%)
100%
Week 1 Week 2 Week 3 Ramp up time
Productivity of Additional Resource
Productivity of Rest of the Team
Implementation Guide
26PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Resource Bottleneck Impact Calculator Primary Drivers of Resource Bottlenecks
Source: PMO Executive Council research.
Implementation Guide
Cost Categories
I. Inability to Anticipate Resource Bottlenecks
II. Inability to Embed
Resource Versatility
1. Lost Productivity
(A) Lost Time to Respond
(B) Resource Ramp-Up —
(C) Resource Over-Utilization
2. Unplanned Staffi ng
(D) Staff Augmentation —
(E) Unplanned Outsourcing —
3. Unplanned Maintenance
(F) Unplanned Maintenance —
4. Hidden Costs
(G) Rework
(H) Unplanned Attrition
27PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Resource Bottleneck Impact Calculator Quantifying Bottleneck Severity
Drivers of Bottleneck Severity Low Bottleneck Severity Medium Bottleneck Severity High Bottleneck Severity
1. Bottleneck size in FTEs 0.8 1 1.2
2. Number of weeks an FTE is not utilized due to a bottleneck 0.8 1 1.2
3. Number of weeks it takes an FTE to ramp up to a new assignment 2.4 3 3.6
4. Number of weeks it takes to complete a bottlenecked task once an FTE is assigned to it 3.2 4 4.8
5. Probability that the bottleneck is non-commodity 53.3% 66.7% 80%
Source: PMO Executive Council research.
Implementation Guide
Model Assumptions
1. Portfolio size: $100M, 220 projects
2. Composition: 55% Small projects ($250K) ; 25% Medium projects ($500K); 20% Large projects ($1M)
3. Average number of bottlenecks per project per month = 2
4. Maintenance bottlenecks as a percentage of the total number of bottlenecks per project per month = 10%
5. Fully-loaded annualized labor costs:
6. New development projects and maintenance requests use a common pool of resources.
• Non-commodity internal FTE = $100K
• Commodity internal FTE = $75K
• Non-commodity outsourced FTE = $55K
• Commodity outsourced FTE = $40K
28PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
How Bottleneck Severity Affects Portfolio Costs An Evaluation of Three Bottleneck Severity Scenarios
Impact of Resource Bottlenecks on Portfolio Cost
Average Number of Bottlenecks Per Project Per Month = 2
Source: PMO Executive Council research.
Conservative Savings Opportunity (Low Severity Bottlenecks)
Average Savings Opportunity (Medium Severity Bottlenecks)
Aggressive Savings Opportunity (High Severity Bottlenecks)
1.7
2.1
2.5
0.8
1.3
1.92.2
2.7
3.3
2.4
4.0
5.9
2.5
4.1
6.2
1.6
3.1
3.7
1.6
2.3
3.3
0.1 0.2 0.3
(A) Lost Time to Respond
(C) Resource Over-Utilization
/Burnout
(B) Resource Ramp-up
(D) Unplanned Staff
Augmentation
(E) Unplanned Outsourcing
(F) Unplanned Maintenance
(G) Rework (H) Unplanned Attrition
Cost(Millions
of Dollars)
Implementation Guide
29PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.
Source PMO Executive Council research.
Reducing Resource Bottlenecks: A $20 Million Cost Savings Opportunity
* Ranges are calculated based on 1-3 bottlenecks per project per month.
1 Lost Productivity on Ongoing Projects Costs $6.1M—Resource bottlenecks lead to a signifi cant decline in resource productivity. Work stoppage due to a bottleneck, overtaxed project staff, and the time it takes a new resource to ramp up are the key drivers of this decline in productivity. Exemplars like Marriott, Versign, and TransCanada minimize these costs by consistently sizing demand, building maintenance resources into the capacity plan, and systematically planning for scope change from the very start.
II Unplanned Staffi ng to Resolve Resource Bottlenecks Costs $8.1M—Staff augmentation is a common but expensive bottleneck resolution technique. Instead of tapping into contractors and outsourced staff, exemplars like British Airways re-deploy internal resources with similar competencies to fi ll imminent needs or re-sequence project tasks to ease bottlenecks.
III Lost Productivity on Completed Projects Costs $3.1M—Capacity plans that ignore resources for maintenance lead to understaffi ng on maintenance tasks. When bottlenecks occur, staff shortages affect both ongoing projects as well as completed projects that require maintenance. Exemplars like Verisign use historical data to surface the key drivers of maintenance on their completed projects and factor in the time it takes to complete routine maintenance into their capacity plans.
IV Rework and Unplanned Attrition Costs $2.5M— Bottlenecks cause heroics, and heroics rapidly erode staff productivity, leading to sloppy work that requires rework and eventually to staff burnout and unwanted attrition. While these costs are typically not included in portfolio cost estimates, the organization as a whole ends up paying the price of these “hidden” costs. Exemplars like Goldman Sachs, First Data Corporation, State Farm Insurance, and Johnson & Johnson guard against rework costs and unwanted attrition by building a strong leadership bench that maintains high process maturity and staff engagement levels.
V Inability to Anticipate Resource Bottlenecks Adds $13.4 Million to the Portfolio Budget—Exemplars like Marriott, Verisign, and TransCanada use repeatable project effort estimation techniques to build reliable capacity plans that provide early warning of gaps between supply and demand throughout the project life cycle.
VI Inability to Quickly Relieve Bottlenecks Adds $6.5 Million to the Portfolio Budget—Exemplars like British Airways use existing competency maps to tap into the resource versatility of internal FTEs and avoid the use of expensive external resources.
Assumptions 1. Portfolio size: $100M, 220 projects
2. Composition: 55% Small projects ($250K); 25% Medium projects ($500K); 20% Large projects ($1M)
3. Average number of bottlenecks per project per month = 2
4. Maintenance bottlenecks as a percentage of the total number of bottlenecks per project per month = 10%
5. Fully-loaded annualized labor costs:
• Non-commodity internal FTE = $100K
• Commodity internal FTE = $75K
• Non-commodity outsourced FTE = $55K
• Commodity outsourced FTE = $40K
6. New development projects and maintenance
requests use a common pool of resources.
Key Findings And Action Steps
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