Program management offices (PMOs) are invaluable in improving enterprise strength and growth because they can be used to map strategy to operations, and then increase likelihood of planned results by tracking effective operational performance. PMOs align strategy and operations through a continuous process of identifying, selecting and managing capital investments based on strategic business objectives. PMOs provide the framework that takes business strategy, goals, and capital input, applies methodologies to select the right investments, and then delivers outcomes that maximize the business value of IT investments.
Aligning initiatives to strategy creates a higher overall capital portfolio value. An enterprise gains greater total business impact with fewer and more focused initiatives. Additionally, strategic alignment is a consolidating effort. It eliminates redundant or conflicting initiatives, and increases visibility and understanding of those that are selected.
PMOs start with business case information to compare proposed initiatives. They establish investment categories, target percentages for each category, and evaluate and weigh criteria for individual initiatives to be considered for each category. Then PMOs help select investments by defining and evaluating initiatives, prioritizing and balancing them, and allocating implementation resources. The business case not only enables selection, but also adds value by providing clear performance baselines, which enable portfolio performance tracking. Initiatives are evaluated by comparing competing projects to each other using quantitative methods. Then evaluated initiatives are prioritized so that only opportunities that deliver the most value are funded. This process results in a single, comprehensive inventory of authorized initiatives. The inventory allows organizations to optimize budget, schedule and resource capacity. PMOs then provide ongoing and actionable portfolio analysis and reports to establish investment viability and accountability.
The first step in the overall process to operationalize PMOs as strategic enablers is toestablish preliminary targets in each of four asset classes based on enterprise strategy. These classes were developed by MIT Sloan Management, Center for Information Systems Research (CISR). MIT CISR research found that firms invest in IT to achieve four different primary objectives: Strategic (initiatives designed to gain competitive advantage or major innovation such as those that increase sales, provide a competitive advantage, or drive market position); Informational (initiatives that provide better information such as increased control, better integration, improved quality, or faster cycle time); Transactional (initiatives that reduce the cost of doing business such as those that process transactions, increase throughput, or cut costs); and Infrastructural (those that provide shared services and integration such as business flexibility, or standardization).
With targets in-place, organizations should develop and define business-specific initiatives by gathering consistent, reliable information on each potential project for comparison purposes. Typically at this phase, the information consists of a business case or cost/benefit analysis sufficient to determine business worth. The business case information enables a PMO to conduct an evaluation of alternatives. In this step, proposals are evaluated based on criteria such as business value, financial return, strategic fit, technical fit, benefits risk, implementation risk, and operational risk. This is a culling process that rules-out proposals that may be sound on their own, but that have less value to the enterprise than others.
A governance council should review the list of evaluated proposals for prioritization and selection for inclusion in the portfolio of projects. Then initiatives are categorized and ranked within their category, and the portfolio is balanced to ensure that it remains in alignment with the enterprise strategy.
Maintaining a balanced portfolio enables a business to make the most of organizational resources, maximizing throughput while allowing the business to achieve strategic purposes. Portfolios can be rebalanced by adding or removing projects based on performance or changing business decisions. They can also be rebalanced by redefining scope to reduce risk or increase benefits or strategic fit, and by combining or splitting initiatives to eliminate duplication or leverage compatibility.
The quantification built-in to the process enables organizations to measure performance to ensure investments meet expectations. A PMO should evaluate the overall portfolio by measuring percent invested in “run the business,” vs. “grow the business”, and percent invested in each category (strategic, infrastructure, transactional, informational). The PMO should understand demand and operational capacity by measuring intake growth, and resource utilization. It should gauge the quality of initiatives by measuring actual vs. expected business benefits. And it should measure financial performance by measuring variance to plan, the value of funding in-progress, capital commitments, and earned value.
There is significant opportunity for enterprises to use the framework and methodologies associated with Program Management Offices to provide the same discipline and rigor to the challenge of operationalizing strategic direction that has been shown to be successful in completing individual projects. PMOs can be leveraged as catalysts for turning strategy into action, and then delivering to expectations.