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ESIHorizons Newsletter

May 2004 Volume #5• Issue #5

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Metrics for the Project Management Office

By Bob McGannon, PMP

The project management office (PMO) concept is gathering momentum in the United States and around the world. More and more organizations are reaping the benefits of consolidating their project management functions, thus standardizing methodologies and templates for use in the management and delivery of projects. This growing trend toward PMOs is evidenced by the Project Management Institute's (PMI®) release of the Organizational Project Management Maturity Model (OPM3™), which provides guidelines for increasing the maturity and effectiveness of an organization's project management resources. But what is to prevent the PMO concept from becoming a fad that comes and goes? Metrics are the answer. Metrics can reinforce the positive aspects of the PMO and its affect on the organization. However, project management-focused metrics alone are not enough. Specialized metrics that are centered on the work and contributions of the PMO will ultimately preserve the PMO concept.

Measuring the effectiveness of project management in terms of the accuracy of triple constraint management (scope, time and resources) is a start. However, positive results from these measurements could easily be contributed to a growing skill set among the organization's project managers. Metrics that track the growing contributions of the PMO will assist the management team in validating the ongoing relevance of the PMO. In addition, these metrics can be used to justify additional funds and personnel to expand the PMO role within the organization, as appropriate.

Measuring Organizational Influence: Best Practice Adoption and Maturity
The positive influence of the PMO within the organization can best be quantified by the PMO's management of change across the enterprise. PMI's OPM3™ provides the project management community with a number of "best practices" that can be used as the basis for improvement measurements. In order to track the number of best practices adopted by each business unit, as well as within the organization as a whole, a metric is needed. This metric provides a set of highly visible measurements that can clearly demonstrate the degree of change introduced and managed by the PMO. Along with these measurements, organizations can use OPM3™ and perform self-assessments on a regular basis to reinforce the positive nature of the changes brought about by the PMO.

Metrics for Multi-Project Leverage
The PMO can contribute significantly to the organization by saving time and money via staff and process consolidation. Similar to the way information technology organizations measure "reuse" of code modules, the PMO can measure the reuse of specially designed processes or modified techniques for managing projects. The PMO should also measure instances where centralized project knowledge (that would not exist without the centralized control brought about by the PMO) provides opportunities for the leveraging of skills across several projects. Along with these process measurements, PMO management can track the cost savings achieved through staff consolidation when compared with the engagement of multiple internal or contract personnel.

Process Management and Compliance
A primary function of the PMO is to centralize and standardize project management processes. This is addressed in the OPM3™ documentation as one of the project management "best practices." The PMO's contribution to process compliance can be measured in a number of different ways: by tracking the number of process errors that were identified in projects managed by the PMO; by measuring the number of project reviews conducted and the number of findings that resulted from them; and by measuring the number of new processes created or adjusted to improve the organization's project management methodology.

Assessments of Projects and Project Teams
Quality in an organization is increased through continuous improvement initiatives. Although the contribution to quality made by each individual initiative may be difficult to measure, the culmination of a series of initiatives can increase quality demonstrably. The PMO can engage in a metric to assess the increasing quality of its projects and the teams that execute them. Creating an "incidents index" is a sound way to measure project improvement. This index consists of accumulating points for:

• The variance from a triple constraint variable (one point for every $5,000 over budget or each week over schedule upon project completion, or three points for each scope item missed in the project's deliverables)
• Any findings resulting from project reviews that are not corrected within two weeks (one point each)
• Unplanned project changes (one point each)
• Unknown errors found in the project's deliverables after implementation (three points each)

With this "incidents index," project managers and their teams can focus on the areas of greatest importance to the enterprise. By using this metric, improvement in these areas can be tied to PMO improvement initiatives.

Results Improvement Metrics

The ultimate contribution a PMO can make to the organization is improved business results. Realization of project goals, in terms of return on investment (ROI) or other such measures, are where the "rubber meets the road" for any corporate initiative. These measurements should be assessed by the PMO for all projects. Recommended metrics to be applied in this endeavor are as follows:

• Estimation accuracy. Estimation is a vital issue for most organizations. Measuring the absolute value of the difference between the definitive estimate (the last, most detailed and accurate project estimate) and the actual cost of the project gives PMO management a means to demonstrate estimation improvement. (Don't forget to add in any approved changes to the definitive estimate.)
• Sponsor satisfaction surveys. Projects are ultimately executed for sponsors. All the process measurements in the world won't mean much if the customer isn't happy. Measure the overall satisfaction of the project sponsor and record improvement opportunities. Increased performance here can easily substantiate a PMO's efforts. Issues that surface while tracking this metric can be added to quality and/or risk templates.
• ROI attainment against plan. A well-run, focused PMO can contribute directly to the bottom line by helping to ensures that the ROI for a project meets what was detailed in the original business case for the project. The PMO should ensure that post-implementation reviews are performed to measure ROI. This can be difficult, as a number of factors - many of which are out of the control of the PMO or the project team - can contribute to ROI. The ROI attainment-against-plan metric is still valid, however, and the issues that cause ROI targets to be missed are valuable items that should be incorporated into the PMO's standard risk checklists.

The PMO concept supports an infrastructure that encourages growth while maintaining basic, repeatable success factors. PMOs are helping organizations in many industries succeed in creating metrics to measure organizational success - which can help ensure that the PMO concept continues for years to come.

PMI is a service mark and trademark of the Project Management Institute, Inc., and is registered in the United States and other nations.

OPM3 is a trademark of the Project Management Institute, Inc.

Bob McGannon is a Founder and Principal of MINDAVATION, a company providing project management training and consulting, leadership workshops and team building programs throughout North America. Bob is also a senior instructor for ESI. Bob can be reached at MINDAVATION via the web at www.mindavation.com or by calling (866) 888-MIND (6463).

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