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The Savvy PMO’s Guide to Visibility and ReportingView the eBook • The Savvy PMO’s Guide to Visibility and Reporting
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Measurement is often the missing element to project management. Many organizations follow their project management processes but neglect to review the outcome of their efforts. According to Gartner, “Not only do PMO leaders need metrics and measures to report their organization’s activities accurately, they also need to ‘sell’ the PMO’s usefulness and value to the enterprise.”
PMO performance is not as simple as tracking whether a project was delivered on time or on budget. There is much more that determines whether project delivery was a success, as well as whether the PMO is operating as effectively as it should be. Only when the organization assesses the performance of the PMO can they begin to establish best practices, learning from their mistakes and changing course when data shows there is room for improvement.
PMO performance: Why KPIs are critical for PMOs
Traditionally, it has been difficult for PMOs to communicate the value they bring to the organization; therefore, it is common for the PMO to be viewed only as a bureaucratic, administrative entity. One of the biggest roadblocks to proving its worth is that stakeholders each have different expectations and definitions of success.
The PMO must partner with its stakeholders to provide them with accurate, timely, and focused reporting to inform their decisions. PMI says, “Defining, delivering and measuring the value to the organization are the first of the three interlocking elements of success…it is important for the project / program manager and team to understand how stakeholders perceive value and then to align management of the project / program and the performance metrics to the expectations generated from these perceptions: or to negotiate within the relationships to align expectations with feasible outcomes.”
PMO performance indicators are not intended to cover every possible measurement. Too many Key Performance Indicators (KPIs) only lead to confusion and disengagement.
Instead, PMO performance metrics should be customized to provide specific data that helps the PMO explain how their activities bring value to the business, as well as how it is improving and where there may be opportunities for it to deliver even more value. Stakeholder-relevant project portfolio management KPIs, measured over time, provide hard evidence in the role the PMO plays in continually supporting strategic business priorities.
Determining PMO leading indicators
KPIs for measuring PMO performance fall into two main categories: the internal effectiveness of the PMO and the output of projects. By including specific and focused KPIs in an evaluation of PMO performance, organizations can create a comprehensive way to deliver successful projects that generate true business benefits and value.
It is worth noting that this list of KPIs does not apply to all projects but is a good directional guide for thinking about which ones to use to measure and convey the impacts of projects. For example, a project that is intended to increase revenue will likely not reduce costs at the same time.
PMO leading indicators will vary depending on the organization and what is most important to each stakeholder. There is no standard set of PMO performance metrics. Many PMOs begin with an idea of what KPIs they want to measure and then work with stakeholders to customize them in reports and dashboards.
PMO Performance Metrics: Measuring the PMO’s Internal Effectiveness of the PMO
The category includes many of the day-to-day assessments of how the PMO is performing. Many of these performance indicators can be considered table stakes because they provide a basic list of qualities that all PMOs should be excelling at within companies of all sizes, but there may be additional or different PMO leading indicators that are important to stakeholders.
If in doubt, it is a good idea to present these PMO metric examples to each stakeholder to see which ones they would value. If measuring project portfolio management KPIs is somewhat new to the organization, many stakeholders may not be certain of what measurements would be helpful until they are given examples. The below performance indicators may serve to spark ideas for additional KPIs.
Project completion rates
One of the most basic measures of how well a PMO is functioning is the percentage of projects that are completed as a ratio of all the projects in a portfolio. More illustrative is how many of the projects are completed within the timeframes budgeted for the projects.
This PMO performance metric can be measured for specific periods of time: for example, the ratio of project completion within a quarter or a year, and how this compares with previous corresponding periods. Another good performance metric is how much time has elapsed between project conception and project completion compared with previous years.
Of course, this will vary based on the complexity of the projects, but it provides a measuring stick for similar project types. It is a great way to identify opportunities for improvement on future projects.
Project success rates
Naturally, companies have goals to not only complete projects but complete them successfully, however “success” is defined. That means achieving the main objectives of the project, for example, whether it is the development of a new software application with a given array of features or the creation of a marketing campaign for a new product for a particular market demographic.
This PMO performance metric includes the ratio of successful projects to all the projects in a portfolio and can be extended to the ratio of successful projects that are strategically important for the company to the total number of strategically important projects in the portfolio. Companies can also measure the ratio of successful, strategically important projects to all the projects in the portfolio.
Overall impact of the PMO
What kind of impact is the PMO having on the organization as a whole? This is not a trivial question. In fact, the answer could determine whether the PMO continues to exist.
This measurement delves into areas such as how the PMO is making strategic contributions to the enterprise. It might include performance metrics that measure how much the PMO has increased the success rate of strategic projects completed as a percentage of the total number of strategic projects.
Other possible measures can be based on surveys of management and staff within the project management function or in the organization overall. These might include questions such as whether the PMO is:
- Making work processes easier
- Providing time savings in the completion of tasks
- Communicating the priorities of project portfolios
- Promoting communication and collaboration among different project teams
Improvements in progress
Another consideration is whether the PMO is making improvements in time-to-market for projects such as application development. On average, how much time has elapsed between project conception and the delivery of the final product (or project completion), and how does this compare with previous periods? What improvements have been made in completion times for strategically important projects?
The PMO can increase the speed at which projects are completed and products delivered, which can lead to increased sales, a competitive advantage, and higher customer satisfaction rates.
If the PMO does a better job of keeping project teams on or ahead of schedule, they are more likely to complete projects more quickly. This is an especially important set of performance metrics for the delivery of products that are time sensitive.
Amount of resources deployed
Projects typically require a lot of resources and how efficiently the PMO is deploying resources as part of the project portfolio is an important measure of success. In the PMO world, two of the biggest resources to deploy in terms of financial impact are people and money.
People cost money, so it is important to know how many of them a project will require and how many hours of their skills the project will consume. It may also be important to know:
- How many people are deployed across the entire portfolio
- The cost of the projects
- How these figures compare with previous years
Again, these PMO metrics are only examples. When looking at the grand enterprise-wide picture, there are many other resources to consider. Stakeholders may also want to see metrics on how these resources are being utilized, such as:
- Equipment and other assets
- Data, applications, and other technology components
- Intellectual property/ideas
- Project locations, such as meeting rooms and other facilities
A good PMO leading indicator of performance is how well all these resources are optimized.
Number of people working on multiple projects
Another good KPI for proper utilization of resources is the number of people working on multiple projects. Given the constraints PMOs often face regarding resources, such as the shortage of particular skills, are people stretched too thin because they must work on multiple projects? Does this multi-tasking only serve to delay the completion of one or more projects? Another good question: Are they working on the right projects?
Ideally, the capacity of a PMO’s resources should be maximized as much as possible but not over-utilized. When this is accomplished, a PMO is able to set more realistic expectations with its customers and deliver on its commitments without burning out the team.
Management of conflicts and skills gaps
Given the number of projects underway at a large organization at any given time and the shortage of certain types of skills such as developers and data analysts, it is likely that conflicts will arise among projects. The PMO should evaluate itself in terms of how it is handling such conflicts, as well as skills gaps.
One way to measure this type of PMO performance is to track the number of projects that have existing resource conflicts and compare that with previous years. Another is to measure the time elapsed between the onset of conflicts and the corrective actions taken to address the conflicts.
Is the PMO able to divert resources to critical tasks when the need arises? A survey of project managers would indicate whether they feel the PMO is supporting them in resolving resource conflicts.
Management of risks and how risks are trending over time
Every project in a portfolio carries some level of risk and the PMO must be able to effectively manage and mitigate risk to the extent that it is possible. Some projects have a high level of risk while others are moderate or low in risk. High-risk projects will likely need the most visibility and attention to assure their success.
Examples of risk might include:
- A shortage of specialized resources that are shared among projects
- A skills gap that results from a lack of qualified personnel
- An unexpected decrease in funding
- Cybersecurity threats and vulnerabilities
- Technology-related problems
- Changes in the market for a product or service
- The passage of new legislation that affects the outcome of a project
Any of these might result in the postponement or delay of projects, so it is important to monitor how the PMO is handling risk.
It is also important to track how various risks are trending over given time periods such as quarters or years. This is why monitoring project portfolio management KPIs is so beneficial: it reveals risks that otherwise may be missed.
Types of projects
There is bound to be a variety of projects underway at any given time. This PMO performance metric shows whether a PMO is flexible and understands that work can be done in many ways, depending on who is doing the work.
By giving the project teams who are doing the work the autonomy to deliver the work in their own way, or by trying to control every detail of the work, a PMO can maximize the potential of work that’s aligned to strategy. It can deliver innovative products and services to market faster.
Also, if a PMO has more input from applications and systems where the work is happening, then it has greater visibility into what’s truly going on across the business, through reports and dashboards.
PMO Performance Metrics: Measuring the Output of Projects
This category is more of a reflection of how mature an organization is regarding its PMO function. It includes several leading indicators of the tangible returns projects are delivering for organizations. It also includes areas such as the management of hurdles, which could also fall into the first category but often have a direct impact on the output of projects.
These are only PMO metrics examples. When it comes to PMO performance metrics, one size does not fit all.
Every organization and stakeholder within an organization will likely want to see different KPIs or a variation of the ones mentioned below. Partner with stakeholders to learn what measurements would give them the information they need to gain greater visibility.
Management and tracking of budgets
Clearly, one of the most important aspects of the PMO function is managing budgets, keeping track of how money is being spent and whether the expenses are exceeding the original cost plans. A key measure of budget management is whether projects are on track to be completed on time and on budget.
Companies should look at the ratio of estimated project costs to the actual costs of projects, as well as the improvement of estimated costs versus the actual costs for projects over time. Other areas to look at are the PMO’s integrations into financial systems and time-reporting data from project resources.
Creating a culture of efficiency
For projects to be successful, PMOs need to run efficient operations. That means creating a culture in which employees take care of their responsibilities as part of the progress of projects. For example, are project workers willing to adopt practices that provide the information the PMO needs, such as timesheets and reports, on their progress?
A high percentage of timesheet completion means that the PMO is getting support from stakeholders – top-down and bottom-up – and that the process is not complicated by rules and policies that make collecting such information difficult.
Contribution to corporate revenue / return on investment
Another PMO leading indicator is a measurement of how much revenue the PMO is contributing to the company directly (or indirectly through the results of other parts of the organization), and how that revenue contribution has changed over time. This KPI would clearly be a measure of the business value the office is adding. Revenue generation can come from the introduction of:
- New products and services
- Sales and marketing campaigns
- New partnerships
Along the same lines, return on investment (ROI) measures how much revenue is being generated compared with how much is being spent on various projects. This can be a complex metric because of all the factors that go into project management.
As a result, it might make more sense to look at ROI on a per-project basis. But certainly, it is possible to measure the ROI on the investment managed by a PMO for projects that have a financial return.
How much money the PMO is saving the organization is also a good measure of business value. This includes reducing the costs associated with projects and the management of those projects, which can come from increased efficiencies and better use of resources. Measuring these savings over time is another way to measure effectiveness.
Cost savings can also result from the projects themselves. For example, a project might involve finding a way to revamp a manufacturing process so that fewer materials are needed.
Management of hurdles
The PMO will encounter a host of hurdles, likely daily. How effectively management addresses these challenges and how quickly it resolves them are other good measures of PMO success.
Examples of project hurdles include:
- Ego clashes among project managers, team members, and third parties
- Procrastination and lack of accountability
- Lack of communication among team members and managers
Cycle time / throughput
This metric applies more to Agile development teams from which the PMO is gathering project information. It is important to improve continuously on the processes of these teams and speed the time of delivery of final products to market. If it is a repeatable process, can teams become more efficient by identifying the blockers and bottlenecks to avoid?
As mentioned earlier, improving time-to-market for new products and services is an important measure of the function of a PMO. The performance of Agile development teams is key to a more efficient development project process.
Bring the competitive advantage
The PMO can help drive a competitive advantage for companies in many ways, including delivering market differentiating products and services quickly. As the Project Management Institute (PMI) states, projects “are often defined as the means by which organizations implement strategy [and] it can easily be understood that the purpose of project management is to improve the organization’s competitive position.”
The PMO as an entity is becoming of more interest as the field of project management evolves from techniques that deal with the management of a single project to being one where the entire operation of the organization is considered, the PMI says:
“The amount of guidance provided or the effect the PMO has on directing activities within the organization is driven by and reflects the level of project management maturity.”
And the role of the PMO in providing a tool to better manage, monitor, and manipulate resources gives the PMO the ability to provide a company with a competitive advantage.
Delivering employee satisfaction
The PMO impacts more employees than meets the eye, including those working directly on projects and those affected by the projects in some way. A good PMP metric example is to conduct surveys of project workers to reveal insights such as whether the PMO is:
- Making their jobs easier
- Helping them to save time
- Responding quickly to their concerns
- Communicating the project portfolio’s priorities
- Promoting cross-project communication and the sharing of information
- Providing the necessary training
Employee satisfaction levels can be compared over periods of time to see if the PMO is improving its ability to meet the expectations of stakeholders.
Delivering customer satisfaction
Finally, how well is the PMO delivering customer satisfaction? Customers can be internal or external and projects might be aimed at specific customers or an entire group. Either way, feedback from these sources is an important PMO metric that measures how well the PMO is delivering value to those people and, ultimately, the business as a whole.
Companies can survey customers during and after the completion of projects to determine the level of satisfaction, with assessments in areas such as:
- Timeliness of deliverables
- Communication on progress
- Quality of services
- Whether the results met business expectations
KPIs are Vital – Don’t Neglect Them
Organizations that measure how well their PMO is functioning are more likely to see improved project performance by gaining insight into how the PMO is performing compared to past performance. Without the right performance metrics, it is impossible to improve, let alone illustrate to the business how the PMO is more than a process enforcer. If the PMO wants to gain credibility and become the integral part of the business it has the capacity to be, it must measure the right project portfolio management KPIs and present them in a way that makes sense to its stakeholders.
Using the right mix of PMO performance metrics, companies can make evaluations that lead to:
- Fewer project failures
- Increased business value from projects
- Higher productivity
- Lower costs
- Happier employees
- More satisfied customers
Measuring and reporting on KPIs can help PMOs enhance their value to the organization by finding ways to improve processes in numerous areas. The metrics a company will need to measure PMO performance will vary depending on the situation and the business goals.
Some project portfolio management KPIs for the PMO might grow in importance over time, while others diminish. But the important thing to remember is that KPIs matter to a lot of project stakeholders and they should be a key part of the process of running a successful PMO.