PMO Governance Framework To Measure Decision Effectiveness
We all know that PMO Business Intelligence (BI) is necessary to deliver accurate and useful information to the appropriate decision makers, within the necessary timeframe, to support effective decision making. This fulfils the PMO’s BI mandate but it does not complete the PMO’s highest mandate.
EPMOWORX™ offers a governance framework to monitor and report upon the alignment of deliverables to the organizational benefit and investment.
Problem / Challenge
Organizations are often able to make sound decisions at each level of the organization with the support of a mature PMO BI solution. Nevertheless, actions resulting from these decisions may become diluted and effort may stray from the original decision and intent. Whilst sound decisions can be made, most organizations lack a cohesive governance framework to link a strategic level decision to the appropriate actions and deliveries at the tactical level. Even fewer organizations have an effective framework to monitor the “butterfly effect” of a decision made at the tactical level which may have negative strategic consequences.
How do PMO’s measure the effectiveness of decisions? What type of framework does a PMO establish in order to monitor decisions? How can PMO’s measure the alignment between decision intent and the actual delivery? How can PMO’s identify those agencies impacted by management decisions?
The aim of this article is to describe EPMOWORX™ perspective of the governance framework in order for management to reach the right level of decision making and maintain the alignment of governance between strategic intent and operational delivery.
The PMO Governance Framework
EPMOWORX™ governance framework recognizeS specific levels in the organization and the type of decisions made at the respective levels.
EPMOWORX™ cloud PMO services are designed to offer clients:
The organizational levels for governance are:
Different organizations will operate at their correct terms of reference however, most organizations would comply with at least a subset of these levels.
Management decisions have to be made, monitored and reported upon at different levels of the organization.
The levels of decisions are:
Thereby, Board decisions should be associated with Long-Term Strategic decisions and set Short-term Strategic direction. The Executive would be cognizant of the Long-term Strategic intent and become involved in Short-term Strategic decisions. Therefore the Portfolio management should be stakeholders in decisions impacting Short-term Strategic and Operational outcomes. Finally, Programme management would most likely be an influencer in Short-term Strategic decisions and make operational decisions with project management.
Long-Term Strategic Decisions
Long-term Strategic decisions are based on changes to Business Drivers and their subordinate Executive Plans.
A Business Driver is a descriptive rationale which is measurable and used to support a business vision. It must also clarify why a change or a completely new direction is necessary.
An example of a business driver is to establish a market penetration of 30% within 3 years into a new geographical region in order to out-compete the emerging competition.
Therefore, the defining characteristics of a measurable business driver should include an owner (for accountability), the Key Performance Indicators (KPI) of; Planned and Actual Cost, Planned Start and Actual Start, Planned Finish and Actual Finish, Planned ROI (30%) and Actual ROI. It must also contain an inventory of plans to achieve the Business Driver benefit. The plans at the strategic level are defined as Executive Plans
There can one or many Executive Plans required to support different the aspects of the specific Business Driver. Executive Plans may represent different areas of the organization or different goals to support the business driver. These goals may include cost take out, increase in productivity, increase in market share or improved cash flow. Executive Plans must have the same measurable characteristics of Business Drivers (ownership and KPIs). However, Executive Plans must also describe in high-level terms the following; Key partnerships, Key Activities, Value Proposition, Customer Relationships, Customer Segments, Key Resources, Channels, Cost Structure and Revenue Streams.
The PMO is responsible to furnish this information, from the appropriate agents to strategic management. Furthermore, PMO’s must also be confident that they have the means to monitor, measure and report upon those same strategic characteristics after decisions are made which influence business drivers and executive plans.
Short-Term Strategic Decision
Short-term Strategic decisions may be directives from the Board but are most often the responsibility of the Executive with Portfolio management as stakeholders. Short-term Strategic decisions most often portfolio outcomes that are enablers for outcome in meeting Long-term Strategic decisions. Generally, it will be the maturation of a portfolio return on investment over a shorter period than Long-term Strategic decisions.
Operational Decisions are designed to influence the execution of the Executive Plan on each impacted investment/asset group (the portfolio).
Portfolio management is the first level of operational management. It is the collection point of relevant investment initiatives and the formulation point of appropriate programmes to bring the organization into alignment with changes required by the Business Drivers. Portfolio initiatives are spawned from approved Executive Plans. These initiatives will have a business case and will identify those programmes necessary to meet the goals of the Executive Plans. Again, the measurable characteristics of change at the portfolio level are ownership for accountability, Performance Indicators (KPI) of; Planned and Actual Cost, Planned Start and Actual Start, Planned Finish and Actual Finish, Planned ROI and Actual ROI. In most circumstances, a portfolio experiencing change will have one or many programmes within its investment initiative.
Programmes are necessary as “temporary organizations created to coordinate, direct and oversee the implementation of a set of related projects and activities in order to deliver outcomes and benefits related to the organization’s strategic objectives” (OGC Portfolio,Programme and Project Offices). Effectively, a programme will also be measured by ownership and KPI’s.
Operational decisions also include Project Management decisions. The project is a limited endeavour designed to deliver a specific output in order to contribute to the stated business benefit of the programme. Whilst it does have ownership and similar KPI’s for PMO’s to monitor and measure, the emphasis is more on measuring the defined deliverables on the basis of the cost of effort, logical execution of activities, measuring milestone variances and the quality of the deliverable.
The existence of BI inside a PMO often serves management at all levels. The PMO BI is a means of providing accurate and timely information for management to make sound decisions. This PMO capability only reflects a portion of the holistic mandate placed on mature PMO’s. PMO’s must establish a framework to monitor and report upon the effectiveness of decisions at all levels.
The best way for PMO’s to measure the effectiveness of decisions throughout an organizational change is to ensure governance linkages exist between Long-term strategic, Short-term Strategic and Operational levels. Each level has measurable characteristics that PMO’s can monitor and report on.