How to Create a Successful Services Business Via a Project Management Office

A project management office is often associated with just the management of projects, but in this article the case will be made to broaden the scope of a Project Management Office to encapsulate the entire services business and will explain the reasons such a structure is necessary.

How a Project Management Office is commonly Defined

Historically, the purpose of a Project Management Office (PMO) is to deliver a project on-time and on-budget through the use of project management best practices. A PMO manages all aspects of a project including budget and resources. Organizations that don’t use PMOs will often find variability in how projects are managed and a lack of consistency in the delivery of quality projects. Often PMOs come into existence through organizational frustration with current project success.

Why a PMO needs a different organizational structure

When organizations are looking to implement a PMO a common question is: Should we establish the PMO and place various technical resources in that PMO and thus creating a new services organization? Or should technical resources stay within their current functional organization and only have the project managers housed in the PMO? In other words just set up a project department.

Project work, such as in the IT services business, especially projects for outside customers, is much different from standard IT work. First, internal projects often have a definitive delivery schedule but often the deadline is flexible, depending on when resources are available and unlike external projects, there are no contractual obligations for an on-time project completion. Second, internal projects, if using internal resources, will be of a size and scope that internal resources can handle. External projects, on the other hand, can be quite large in size and may require many resources

In order for a PMO to work effectively management at the executive level has to make a decision to shift power and authority from functional management and create a service organization with decision making authority given to project leaders. To place a PMO within the current management structure can and will cause conflicts. The resources need to be available to do work on a project as the PM sees fit and not negotiate with the functional manager every time the resource is needed. By using a functional management, bottlenecks can often occur (e.g. having the same engineer work on multiple projects), versus an engineer that is assigned to a project in a PMO and only that project. The financial penalties and the assigning and managing of resources variable size projects dictate a project structure is enacted.

How to Design a PMO

The creation of a PMO starts with a holistic approach to the services business covering all aspects from sales to project delivery to operation. There needs to be a high-level person in charge of putting together the entire process and aligning personnel (responsibility/accountability) to the project structure. Someone of a lower stature would be ignored.

The first step is to set objectives that transcend individual functional areas. Joint ownership in project success is required whether the participant is from sales, the delivery organization or operations. Everyone has to have a vested interest in the project being sold, delivered and managed profitably.

Let’s talk about the organizational structure and use the example of a company is in the services business of designing and deploying voice/data networks. It will need engineers with Cisco, Avaya and Microsoft certifications and expertise and these engineers will be categorized into broad pay scale bands based on their expertise and accreditations. These engineers are placed in a pool and are assigned to a project as needed by the project manager. Assigning means they are attached to the project and are not available to be used on other projects, unless the PM agrees. The project manager directs all the activities that need to be done by the engineer for the project.

However, administrative issues (vacation, reviews, and sick days), will still need to be addressed. In order to not take time away from the PM (and thereby take away time from the project) an administrative manager is used. Often this administrative manager (also called a resource manager) will support a group as large as 100-150 engineers. This resource manager will track vacations, sick days, time entry, etc. In addition, there are three main areas besides administrative the resource manager addresses and this where they really add value to the organization. 1) Is determining when additional resources need to be added to the team and 2) when skills of existing resources need to be upgraded and 3) when new skills need to be added (e.g. social media consultants/engineers) to the current set of resources. The resource manager forecasts resource requirements based on current project load and sales that are in progress to determine when additional people are needed. The second area is addressed when the resource manager solicits feedback from the project managers and sales teams to determine if the skills set of the current engineers are adequate for the current projects and expected future projects. This feedback is used collectively to analysis the skills set of a particular type of engineer and is not used to evaluate individuals. Skill set evaluations will identify those set of engineers that need additional training classes to keep their skills current (or required certifications current). If skill sets need to be upgraded for that type of engineer, then the resource manager will work with the internal training department or a training organization, to craft education to fill this void. In addition the resource manager will determine, based on discussion with the sales and delivery teams, if new skills need to be acquired for the team to meet new project requirements or to have the talent available for new projects (i.e. new service offerings that require skills not in the current talent base).

How to Avoid Unprofitable Projects

The project management office determines the entire process for selling and managing of projects. Before a single project is sold, the services organization creates a business case for the service, defines the scope of the service, the type of skills needed to deliver the service and the activities contained within the service. In addition, the deliverables of the service are created and responsibility for the individual deliverables is determined (i.e. engineering, project manager, operations, etc.). Templates are created for each of the deliverables.

The sales and delivery process for a service organization would be established as follows: The sales team identifies an opportunity and as the deal is qualified, brings in a person that has delivery responsibility for that type of project. This person would be responsible for signing the contract along with revenue responsibility and project Profit and Loss (P&L). They are responsible for the entire project. Often in organizations this person is known as a Practice Manager or a Principal. But the sales team doesn’t just hand off the opportunity to a Practice Manager. Jointly sales and delivery make the sale. The sales team has be integrated with the delivery team with clear lines of the responsibility so the SOW gets created in a timely manner and all the necessary areas are addressed. Every resource needs to be aligned to and have ownership in success of a project.

Compensation for all involved parties has to be tied to successful completion/operation of a project, which means the project is profitable. The compensation package for sales cannot be based strictly commission on the sale of a service. A large part of the compensation has to be successful delivery of the service, whether the project is a 3 month deployment or a 3 year outsourcing deal. By paying compensation over the duration of the project, the sales person will try very hard to sign a profitable deal. The sales team may balk as such a type of incentive package with the argument “I’m not responsible for the delivery team and have no control over their success or failure.” A valid argument, however, sales needs to see it from the other side. How does the delivery team know that there have been sufficient hours written into the statement of work for all the delivery areas? How can the delivery team ensure that all the requirements have been gathered from the customer? Delivery can provide detailed input to the Statement of Work (SOW) and make sure the assumptions and project requirements are in sufficient detail for a well-defined scope, which can help mitigate risk. Without successful project completion incentives, there is no incentive for sales to close deals that can be profitably delivered. There are many valid reasons the delivery team needs to have joint responsibility in the creation of the SOW.

Conclusion

In creating a services business it is important to take a project approach in building and compensating the organization. By designing the service prior to selling it and thereby determining the deliverables and the associated costs, an organization has a much better chance of selling and delivering profitable projects.

Construction Companies Benefit From Project Management Professionals (PMP)

Eighty percent of construction companies fail within the first two years, with another 18% joining their ranks in another three years.

There are various reasons that lead to a construction company going in trouble, including general economic conditions, not being competitive, heavy operating expenses, poor accounting system or even high employee turnover, but none impact a construction business as significantly as lack of project managerial expertise.

The Project Management Professional (PMP) certification is for project managers with extensive experience. Qualifications and testing criteria are rigorous, making it a widely respected certification. Generally speaking, construction projects are run by contractors, not by certified Project Management Professionals (PMPs).

The contractors would say that they’re the only ones who truly understand construction, because they’ve been there and done that; but, is that viewpoint valid? Where does the need for hands-on experience end, and the need for rigorous and structured project management ability begin?

Most contractors, whether general contractors or specialists (plumbers, electricians, etc.), worked their way up in the construction business. That means they started out as an apprentice, became a journeyman, possibly were promoted to being a crew chief or jobsite superintendent by the company owner, then eventually stepped out on their own to start their own company and be a contractor.

Here are 5 basic areas in which these contractors and Professional Project Managers think differently. These areas can make or break a project, specially when it comes to maintaining the project on schedule and on budget:

1 – Bidding Strategies and Change Orders

The world of construction is highly competitive, especially in today’s economy. Each job out there has a number of contractors bidding on it, driving prices down and all but eliminating profit margins. A common strategy which many contractors are using today is to bid the job with minimal overhead and negligible profits, depending on “Change Orders” to make their profits.

While this strategy works, it may not be working quite as well as many contractors would like. The very fact of bidding a job in that manner means that there is little room for error. Even a slight error in scope management, cost estimating or scheduling can take a project from profitable to being a loss.

If the project is being provided under a contract, then some advance thinking has to go into how to deal with “Change Orders” when they occur. Project Management Professionals approach Change Orders with a different mindset, since they see this as a change to the original “Plan” and seek to integrate the change into the overall plan instead of “tacking it on top of” work that is already being done.

Approved change orders can require revised cost estimates, new schedule updates, revised activity sequencing, additional risk analysis and even calculation of cumulative impacts. Therefore setting up a “Configuration Management” process with integrated change control provides an effective way to centrally manage and document change orders, while providing opportunities for increased profit margin.

2 – Claim Management

Although this may seem the same as the change orders (mentioned above), it is actually a separate area. “Change Orders” deal with changes for which both the owner and contractor are in agreement. “Claims” deal with areas where there is disagreement. These are extra charges due to unforeseen problems on the project, which the contractor wishes to recoup from the owner at the time of project closing. What makes these claims challenging is the difference in interpretation of the project scope. The owner may feel that these unforeseen situations are part of the scope of the contractor, while the contractor may see them as extra costs he incurred, for things outside of his control.

Effective claim management requires thoroughly documenting the problem, sending on-time notifications to the owner, including estimates of cost and schedule impacts, along with creating a convincing justification for the charges. This is one of the most challenging communication problems on a construction project. Project Management Professionals are trained in dealing with claims, whereas the typical contractor is usually at the mercy of the owner.

3 – Thinking “Tasks” instead of “Processes”

Eighty percent of construction companies fail within the first two years, with another eighteen percent joining their ranks in another three years. It’s not the lack of knowledge in construction, but the lack of knowledge in how to manage their projects. This article describes how construction companies benefit from Certified Project Managers.

A contractor or construction superintendent usually becomes such because they know how to do the job. But, that isn’t the same thing as knowing how to manage the job. They see the project as a series of separate tasks; get all the tasks right and the project will come together.

However, Project Management Professionals (PMPs) are trained to think in terms of “processes.” Thinking this way creates a more global approach to the project, seeing the individual tasks as only part of the processes. This drastically changes their approach to managing a project, seeing how things fit together not so much by a “gut feeling,” but as a continuing path, filled with measurable risks and challenges, towards a specific goal. There are parts of this PMP mindset, such as Communication Management, Risk Management and Time Management which are not directly related to the ability to swing a hammer:

– Not knowing how to set up a “Communication Plan” to clearly define how to communicate the right information to the right stakeholder at the right time can cost a company that just got off the ground heavily.

– Not knowing how to create a “Risk Management Plan” or “Risk Register” for the project, including how to deal with those risks, whether by mitigating them, eliminating them or transferring them, could become fatal.

– Not knowing which tasks on your project are on the “Critical Path” could extend your schedule (hence costs) by enough to make your profits marginal or non-existent.

4 – Managing Technical Changes

Integrating, communicating and managing technical changes, such as changes to a building’s blueprints or equipment drawings requires thorough action, which is properly documented to ensure that everyone is made aware of the change. These technical changes can be as minor as a change in paint color to something major enough to cause a skyscraper to fall down in high winds. Regardless of the size of the change, each one is important to the owner, requiring proper integration and implementation.

As part of their training, Project Management Professionals learn that change requests should be subject to a thorough process that may require analyzing estimated impacts on cost, quality or schedule before the change is approved. Coordinating changes across the entire project, and documenting the complete impact or technical change should be a second nature to any project manager who seeks a successful and profitable project outcome.

5 – Managing Suppliers and Subcontractors

A major part of managing a construction project is ensuring that the work crews and supplies are on the job site when they are needed. A typical contractor deals with their suppliers at the last minute, calling in their orders and expecting delivery the same day. Their way of dealing with subcontractors bears a closer resemblance to browbeating than any accepted management philosophy.

When a construction project is properly managed, a project schedule is created before the first person shows up at the job site. This schedule is maintained and adjusted as needed, be it due to adverse weather, construction delays or other problems on the job. With an accurate project schedule, there is no reason to deal with suppliers and subcontractors on a last minute basis. Everything can be pre-planned and communicated to the proper people well in advance.

Another problem with managing sub-contractors is that when problems occur, the buyer (contractor) has little leverage for claiming the incurred costs due to seller’s (sub-contractor’s) fault. A procurement contract should include terms and conditions that contractor specifies to establish what the sub-contractor is to provide. By including the right terms and conditions into the sub-contracts, many typical problems can be avoided.

As part of the Project Management Professional training, “Procurement Management” is discussed within the perspective of buyer-seller relationship. This relationship exists at many levels, including sub-contractors performance evaluations. These processes indicate if the sub is performing the work according to plans, rate how well the work is being performed, create the basis for early termination of the sub’s contract, and application of penalties, fees or incentives.

Understanding Project Management As Related to PMP Certification

This article will provide an overview of projects, and the relationship between portfolios, programs, and projects, an overview of the processes within project management and discuss it in the content of PMP certification and the PMBOK, the project management book of knowledge.

Many organizations today have a renewed interest in project management and its many benefits. Project management is used on all levels of the organization and is now seen as a valuable profession. Organizations have realized that project success relies on the knowledge, processes, skills, tools, and techniques that skilled project managers can bring to the project.

The Project Management Institute (PMI) is the governing body that issues project internationally recognized management certifications.

There are six different types of certifications that can be obtained after completing the required coursework, field experience, and passing the exam. These include the following:

  1. Certified Associate in Project Management (CAPM)
  2. Project Management Professional (PMP)
  3. Program Management Professional (PgMP)
  4. PMI Agile Certified Practitioner (PMI-ACP)
  5. PMI Risk Management Professional (PMI-RMP)
  6. PMI Scheduling Professional (PMI-SP)

The successful completion of the PMPĀ® examination will show employers that you are an internationally recognized project manager.

A project is a unique undertaking so the approach to managing projects must be different compared to normal operations. Projects are a temporary endeavors and have a clearly defined start and end date.

There are distinct differences between projects and the normal, daily operations of the organization. Characteristics of operations include tasks that are on-going and are usually in a continuous cycle, they have no end date as they are crucial to the daily functions of the organization.

Operations are also repetitive and the inputs and outputs are expected and routine. There is usually nothing unique about operational tasks. Projects, on the other hand are temporary endeavors; they have a definite beginning and end, they are also unique and involve a new undertaking for the organisation and are unfamiliar ground that the organization has not explored before.

Projects can include one or more individuals, one more departments, and even one or more organizations. They can create a variety of tangible or intangible products, deliverable, services, or results.

A few examples include the following:

  • A product can be unique to the organisation and one that has never been produced before or could be an additional add-on to an existing product.
  • It be focused on improving a service or an process for an organisation
  • A project can be an improvement to an organization’s existing products or service lines or it can also be results-based, such as implementation of a computer system or producing an analysis or research document.

Some examples of projects from various industries are:

  • A young couple hires a firm to design and build them a new house.
  • A college campus upgrades its technology infrastructure to provide wireless Internet access.
  • A Banks decides to implement a NEW Customer service computer application
  • A group of musicians starts a company to help children develop their musical talents.
  • A pharmaceutical company launches a new drug.
  • A television network develops a system to allow viewers to vote for contestants and provide other feedback on programs.
  • A government group develops a program to track child immunizations.

These various examples show the diversity of projects and the importance of project management across different industries.

In project management, there is a key relationship among portfolios, programs, and projects. As we have discussed, a project is a unique undertaking so the approach to managing projects must be different compared to operations.

Projects are temporary endeavors and have a clearly defined start and end date.

A program is a group of projects that are similar in scope, activities, and similar subprograms. The purpose of a program is to manage the projects in a coordinated way that would not be possible from managing them individually.

The portfolio includes all programs, projects, and subprograms that meet the strategic objective of the organization Programs and projects do not need to be related in order to be in the portfolio; they only requirement is to be related to the overall strategic objective(s) of the organization.

So what is project management? The simple definition is the management of projects. However, project management is much more than a simple definition. A more useful definition in understanding project management is the application of knowledge, tools, skill, and techniques to project activities in order to meet project requirements.

As defined by the PMBOK Guide, there are five distinct processes that projects go through.

These include the following:

  • Initiating
  • Planning
  • Executing
  • Monitoring and Controlling
  • Closing

During the Initiating Process, the need of the project is clearly defined. This is an important first step as the scope, budget, and timeframe will all be based on the need and expected outcome(s) of the project.

In the Initiating Process, the Return on Investment Analysis is also conducted. The organization will determine if the expected outcome of the project is worth the time, cost, and resources required to complete the project. Based on this information, the organization may determine whether to move forward with the project or stop the process. If the project continues, the final step in the Initiating Process will be to begin the development of the budget.

During the Planning Process, the project scope is defined, the budget is set, the timeframe is determined, and the project team is assembled. As the Planning Process moves forward, the project’s activities will be determined and the responsible project team members will be assigned their various tasks.

During the Executing Process, the actual tasks and activities of the project begin to be worked on and ultimately completed. The Monitoring and Controlling Process actually takes place alongside the Executing Process. During this process the various tasks and activities that are being executed are watched for any variations in terms of scope, time, and budget from the original plans of the project. If there are variations, corrective action may be necessary to keep the project from becoming a failure. During this Process, risk management is conducted to ensure that unforeseen interferences do not derail the project. Changes are likely to occur with any project, so project managers need to assess the various situations and make the necessary changes to keep the project moving forward.

The final process is the Closing Process. During the Closing Process, the project is completed and delivered to the end users.

The customer will review the project to determine if all scope requirements have been met. Once approval is obtained from the end users, the project is officially completed and all project-related documents, accounts, and activities are closed-out. The final task of the project team is to complete the “lessons learned.” This is the process of assessing and communicating what went well with the project and what could be done differently in the future to make similar projects go smoother.

To summarise,in this article we have focused on understanding what a project is and where it fit within programmes and portfolios