In their massive rock anthem, We Are The Champions, the band Queen boldly declare, “No time for losers, ‘cos we are the champions…”
Perhaps this goes some way to explaining why 72% of PMOs are being called into question by their executives; perhaps they too have “No time for losers…”
And today, we’re going to figure out where you sit. Are you a Champion or an Underperformer? Or, most likely, somewhere in between?
Today, we’re going to put numbers on how well your portfolio is performing relative to the best performers... and relative to the worst performers. We’re going to use the PMI’s “Pulse” annual report for 2017 as the benchmark and there’s nowhere to hide.
I don’t do this to be nasty or mean to anyone.
This blog is there to help you get the support you need from your executives to become a real high-performer. Many PMOs are “held back” because the executive team doesn’t really understand the potential business impact of improving project portfolio performance.
I hope this blog will help you articulate the potential up-side of a strong PMO. Use it to win the support of your executive team, to get the mandate to change things around.
Champions and Underperformers
The PMI’s “Pulse” report compares 2 groups of PMOs, the Champions and the Underperformers.
Champions: This is the top 7% of organizations surveyed in the Pulse report. To be a Champion, you need to complete at least 80% of projects within budget, time and achieving the business goal. These guys are really good!
Underperformers: In contrast, Underperformers deliver less than 60% of projects on time, on budget and on target (delivering stated business outcomes). I suspect many underperformers fall far short of even this benchmark. Underperformers represent around 12% of respondents to the Pulse survey.
This infographic puts some numbers on the difference between Champions and Underperformers. These differences are staggeringly large and have a direct impact on your organization’s overall performance.
It’s in these differences that the business case lies for really investing in a strong PMO.
What makes top-performing PMOs different?
All this data comes from the PMI and they did some analysis about what the "Champions" do differently. The difference can be summed up in just 3 words;
THEY ACT STRATEGICALLY.
This means they tend to think about portfolio-level activities such as delivering strategic alignment, project prioritization, etc. and focus less on project-level interventions. That doesn't mean they don't look at methodologies and templates, etc., but those project-level activities are not what makes the difference. It's their strategic focus that allows them to achieve great things... so let's go on and look at how great!
Late projects cost real money!
Now, let’s imagine you’re spending $100m per year and that you typically deliver 100 projects with that $100m. An Underperformer is delivering 64 fewer on-time projects than a Champion. You can see it clearly on the infographic, with the big blue circle dwarfing the green one!
That’s 64 projects that are delivered late that would have been on time if you were performing like the best of ‘em.
Let’s say that, on average, those projects are 3 months late and that, on average they cost $1m. Now - here comes the leap - each project exists to deliver business value. Let’s say that value of a typical project is simply that it’s going to save the company it’s own cost each year (many organizations won’t consider a project unless this is true).
Delaying this project by 3 months means we don’t start saving until 3 months later than we’d planned.
That is a direct cost of $250,000. Yep, delays cost money. It’s not just about making your stats look good; this is real money that’s leaking away when you deliver late.
And you’ve got 64 projects that are delayed. That’s $16,000,000 of unrealized savings just walking out the door every year because projects are late.
Don’t blow the budget!
Underperformers suffer 7.5 times as many over-cost projects than Champions.
Seven and a half times. Holy smokes!
Again, let’s assume our $100m / 100 project portfolio. It keeps the maths simple.
Champions will have 10 projects go over budget whereas Underperformers will have 75. That means Underperformers have 65 “extra” projects going over budget.
Let’s assume an “over-budget” project overruns by just 20% (often, projects within 10% of target are deemed “close enough”) and each project has a cost of $1m…
65 projects x 20% overrun x $1,000,000 cost per project = $13,000,000
Are you hitting the target?
The whole point of your project portfolio is to deliver the strategy of your organization (while ensuring compliance, etc.). If you’re not delivering on that strategy, then your portfolio is a waste of money and of people’s lives!
And there’s a massive difference between Champions and Underperformers in this area.
Underperformers only deliver on the business goals of the project 33% of the time. Champions deliver business goals 92% of the time.
Now, if you subscribe to the idea that a project that doesn’t deliver its intended business value is a waste - true up to a point, in my view - then that’s a massive 59% of your budget that is not, fundamentally, achieving anything useful. In our now-familiar $100m/100 project portfolio, that’s 59 projects, representing an investment of $59m, that is not delivering business value.
Let’s assume that projects that don’t deliver on the stated business goals DO deliver, oh I don’t know, 30% of their “intended value” in other ways. Does that seem fair? It’ll do for now so we can work on some numbers.
Okay, so means that 70% of the projects that “miss” the target is a complete and utter “waste”. Let’s plug in the numbers.
59 projects x 70% waste x $1m cost per project = $41m
$41,000,000 of expenditure that produced nothing productive!
This is just the money you spent delivering projects without getting value back.
On top of that, you need to add the “opportunity cost” which is simply the lost business benefit. Let’s be clear, if those projects had achieved their goals, this is the real benefit you would have realized.
But the Underperformers didn’t deliver on the goals so that benefit is lost - and it’s the great invisible cost of poor project delivery.
Project prioritization matters
They are also 50% more likely to finish on time and 45% more likely to finish within budget.
Project prioritization and selection has a direct impact on project success.>
There are many reasons for this including better executive sponsorship, better alignment between project-and-resource, better scope management, etc.
If you’re looking to improve portfolio performance, this makes project prioritization the quickest of quick-wins. Changing the way projects are implemented takes time. You have to influence and change the way every member of your project delivery organization works and that takes time, money, persistence and (quite often) the patience of a saint!
>In contrast, project prioritization can be “sorted” in just a few meetings and affects only a handful of people. We often see benefits within weeks.
But there is a right way to do prioritization. My rule of thumb is that if it “ain’t AHP, it ain’t valid”. This guide tells you more on project prioritization methods - I won’t digress too far here.
Suffice it to say that researchers have shown that only 2 methods of doing project prioritization are really “suitable”. This is because it’s a multi-criterion, multi-person decision and other methods are not very effective in that situation.
Of the two methods, AHP and DEA, we think AHP is much more usable and that’s why we built it into our project prioritization software.
The chances are that you are not a Champion if you’ve read this far.
You’re probably not an Underperformer either. You’re probably somewhere in-between. This means you still have room for improvement.
I talk to many PMO leaders who know what needs to be done to deliver more consistently, but who don’t have support from executives to make the necessary changes. So, step one is to go get that executive mandate and support.
Start by making the problem visible. Measure, as best you can, your own performance and build your own “what poor project delivery is costing” presentation, infographic, or something equally visual and compelling. I used Venngage, for example, to create the PMI Pulse of the Profession(r) infographic on this page.
Be really clear on the following points:
- Here’s where we are (your current performance)
- Here’s where you could be (don’t be over-ambitious and be cautious with timelines)
- Here’s the benefit to the organization. If you talk about fewer “late projects”, turn that into real business benefit something like the way we did in this blog
- Be clear about what the cost is, and how long it’s going take (longer than you think, so give yourself lots of runway)
- Be clear about what you need to be successful. In particular, talk about technology, people and, most importantly, executive support.
Armed with this little lot, go socialize the discussion with as many influencers and stakeholders as you can before “formally” presenting it. This will ensure you have the best chance of getting the support you need.
The rest is up to you. I’d typically recommend starting with high-impact, low-effort items like “sorting project prioritization” (tho’ I am biased), but some people prefer to start with looking at methodologies, registers and governance.
In this webinar, Mike Hannan of Fortezza Consulting, talks about how to dramatically increase the “upside” from your portfolio. Again, some good, practical advice.
In fact, we have a whole page with lots of useful (we hope) material for anyone wanting to improve the performance of their portfolio of projects.
Getting to be a Champion can be a long and difficult road, but it’s definitely worth the effort. Heck, even Queen said, “It’s been no bed of roses, no pleasure cruise,” and I suspect most Champion PMO leaders have endless stories to tell about what it took to get there.
So go ahead. Challenge yourself, challenge your executives, challenge your whole team to be Champions!