How to Build a Project Management Office That Helps IT

A project management office can boost the credibility of IT throughout the company -- or add another layer of bureaucracy. How you build it is key.

Eight months into an 18-month, $2-million technology project, Robert Golden had a disturbing revelation: There was no way the project would meet its timetables. It was tracking toward failure.

And so Golden, director of project management and head of the project management office (PMO) at $110-million Insurance House of Marietta, Ga., gathered his research materials and contingency proposals and trudged off to bear the bad news to top management, including his boss, COO Jacqueline Schaendorf.

It was something his predecessors would never have done, he says. They would have just tried harder to stay on schedule, only to disappoint everyone in the end by consuming resources and wasting time on an ill-fated project. Still, Golden wondered how his news would be received. He'd been on the job for less than a year, and in the company's history no one had ever killed an IT project.

In the meeting, Schaendorf listened to Golden's dire project review and evaluated his proposal to extend the timeline. But, she said, market needs will have changed by the time Insurance House completes the project. Well then, said Golden, let's stop the hemorrhaging and kill the project. To his surprise, Schaendorf nodded her approval: Golden had just saved the company more than a million dollars. "It was the 'Bingo!' moment for the PMO," Golden says.

Though Insurance House had had a PMO for years, the experience of saying goodbye to sunk costs showed for the first time how valuable it could be. Run correctly, the PMO could be an early-warning system of failure.

And herein lies the great disconnect: Not all PMOs are created equal. Good ones -- given sufficient authority, supported by management and staffed by the right people -- can be a CIO's best friend in helping to deliver a track record of successful projects. They offer an encompassing, critical view of how projects relate to technology resources and business goals. But poorly executed PMOs that wield little power serve mostly as an added layer of bureaucracy and only reinforce the age-old stereotype that IT has tunnel vision.

At Insurance House, several factors were behind the sea change. "Previous PMO attempts did not achieve the same level of support from the business community," says Schaendorf. "This is the key differentiator in the approach we have taken under Robert's leadership. Additionally, our previous attempts did not incorporate holistic resource management views to get the complete view of capacity versus the view of project-only capacity of key resources."

Indeed, research shows that without the cross-business coordination and oversight of a PMO, projects often fail. Through 2008, 75% of $500,000-plus projects that fail will be planned without a PMO, while 75% that succeed will be guided under the watchful eye of a project office, according to a Gartner report. "In all the project recoveries we've done, none had a PMO," says Tim McCracken, vice chairman of Tatum LLC, a technology consultancy in Atlanta. "In fact, a project recovery often includes the installation of a PMO."

Most organizations with $1 billion in annual revenue have a PMO inside their IT departments to look at the resources, integration, strategic value and timetables of projects holistically. But smaller organizations are often on the fence, says McCracken.

Part of the problem is that the concept of a PMO, as well as the many forms a project office can take, varies greatly and thus adds to the confusion about whether to establish one. "So what's a PMO? I hear that all the time," McCracken says. Such confusion often leads to inaction.

This was first published in May 2006

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