PMO State of the PMO Function

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

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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.

3PMOEC1A8YAXV © 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


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%


Top of the Priority List for Second Half of Year



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








State of the EPMOEPMOs maintain authority over large budgets…

EPMO Budget Managed, 2006–2007

Percentage of Companies


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.


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


Shared Resource Pools

Business Unit PMO

Functional PMO

Infrastructure

EPMO

Applications and Operations Support

Architecture

IT Non-IT

IT


Maturing Toward Business ValueEvolution in EPMO Metrics

PMO Executive Council Analysis


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

https://www.pmo.executiveboard.com/Members/ResearchAndTools/Abstract.aspx?cid=100052595&fs=1&q=epmo&program








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.


Pitfalls to Avoid


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


The Size of The Prize


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%


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 [email protected] 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: [email protected]








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


No Involvement


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

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esig

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Rem

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Dow

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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

https://www.pmo.executiveboard.com/Members/ResearchAndTools/Abstract.aspx?cid=100050903&fs=1&q=intel&program


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 Name: CRM








Margin $1,200,000 (100%) (90%) (60%) (30%)

Sales $1,000,000 (100%) (90%) (60%) (30%)

Cost Reduction $500,000 (100%) (90%) (60%) (30%)










Project Name: CRM








Margin $1,200,000 (100%) (90%) (60%) (30%)

Sales $1,000,000 (100%) (90%) (60%) (30%)

Cost Reduction $500,000 (100%) (90%) (60%) (30%)









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

https://www.pmo.executiveboard.com/Members/ResearchAndTools/Abstract.aspx?cid=18017578&fs=1&q=armstrong&program


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


Top of the Priority List for Second Half of Year



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


Appendix

� Resource Bottleneck Impact Calculator


Appendix

� Resource Bottleneck Impact Calculator

� List of Assumptions, Parameters, Inputs, and Outputs

� Scenario Analysis Results

� Key Takeaways

Resource Bottleneck Impact Calculator


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


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%



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


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



Resource Bottleneck Impact Calculator Primary Drivers of Resource Bottlenecks



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


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%



Model Assumptions

1. Portfolio size: $100M, 220 projects

2. Composition: 55% Small projects ($250K) ; 25% Medium projects ($500K); 20% Large projects ($1M)


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


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


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)



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)


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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PMO Executive Council

Washington, D.C. • Chicago • San Francisco • London • New Delhi • Sydney

Documents

PMO State of the PMO Function