Mature portfolio management offices—a key to success

The 2010 KPMG Project Management Survey cited the main reasons for project failure as:

• scope changes (40%)
• 
  resource competition (36%)
• 
  unrealistic deadlines (33%)
• 
  unclear objectives (28%)
• 
  uncertain dependencies (20%)
• 
  poor communication (19%)
• 
  failure to plan (19%)
• 
  customers and end users not engaged (18%)
• 
  lack of organisational/strategic support/governance (16%)
• 
  insufficient team skills (14%)
• 
  poor cost and scheduling estimation (10%).

While not a magic bullet for these problems, a mature portfolio management office will make significant improvements to the project performance. A number of KPMG surveys have shown a direct correlation between the maturity of an organisation’s portfolio management office and project success.

Project offices with stringent compliance [regimes] reported a project failure rate of 20% whilst those with moderate and weaker compliance reported a project failure rate of 80%.
—KPMG Program Management Survey 2002

As the maturity level decreases, failure rates increase in both the Asia-Pacific region and the Rest of the World (conversely as maturity increases, failure rates drop).
—KPMG Program Management Survey 2002-2003

Increased success, or less failure, can be achieved by adopting a range of good individual practices. However, a good collective and systemic approach is required to substantially increase success rate and help to reduce the loss of benefits.
—KPMG’s 2005 Global Program Management Survey

Not to be outdone, PM Solution’s The State of the PMO 2010 states: “PMOs demonstrate significant value. In particular, they’ve contributed a 31% decrease in failed projects on average, 30% of projects delivered under budget, a 21% improvement in productivity, 19% of projects delivered ahead of schedule, and cost savings of US$567,000 per project.”

There’s a direct correlation between the maturity of a company’s PMO and the value it provides. More mature PMOs are far more likely to meet critical success factors. They also demonstrate significantly greater improvements in cost savings per project, decrease in failed projects, schedule and budget performance, and productivity.

Finally, the Centre of Business Practices, as reported in The State of the PMO 2007-2008, drew a strong correlation between the level of PMO maturity and organisational performance. Furthermore, it stated:

Organisations with PMOs show significant improvements at each level of PMO maturity:

• 6.2% improvement from PMO level 1 to level 2
• 
  14.6% improvement from PMO level 2 to level 3
• 
  10.5% improvement from PMO level 3 to level 4

—Where PMO maturity is rated on a scale of 1 to 5 (immature, established, grown up, mature and best in class).

So what is a mature portfolio management office? Firstly, its not about age. Both PM Solutions and KPMG disprove this myth. Rather, maturity is measure of function and capacity.

KPMG’s 2002-03 Program Management Survey defined PMO maturity as “…fully developed capabilities and characteristics that enable an organisation to implement business strategy through the identification, prioritisation, coordination and oversight of successfully, consistently and predictably delivered projects.”

These capabilities and characteristics include:

• 
  mandate and authority;
• 
  methodology, tools and processes;
• 
  human resource factors such as core competencies, training and communication;
• 
  organisational support for projects such as procurement and quality assurance;
• 
  involvement in business planning and alignment of projects to business strategy; and
• 
  timely, accurate and relevant reporting.