In defining the PMO KPIs, you are in one of three places:
- You’ve got a burgeoning Project Management Office/Organization (PMO) and have been directed to define the PMO Key Performance Indicators (KPI).
- You’re directing or leading a PMO that has lost its luster and has no way of understanding its impact or value.
- You’ve been tagged as the leader of KPI definition in the PMO.
Or maybe you are just interested in how PMOs need to define their KPIs.
Establish KPI Vocabulary
First, let’s define what KPIs are. In short, the KPI is a measurement of the organization’s goals and how you are meeting them. In this example, we are specifically speaking to PMO organizations. You will find very simplified versions of KPI definition but your KPI vocabulary needs to be one that is already established in your organization’s culture, or you are defining it now. Large or small, the team need to understand what KPIs mean to your PMO and its stakeholders.
The critical part of KPIs is what establishes the KPIs importance. That measurement can show failure too. I like to think of those as missed opportunities. After all, you can’t improve what you can’t measure (that’s a quote but author attribution escapes me).
Each term, like KPI, need to be defined as you build out your KPI structure. In PMOs, terms like a project, portfolio, governance, resource, benefits realization, deliverables, success, and hours all have meaning. As you decide on what KPIs will be measured and monitored, you need to discuss and agree on the definitions. Draft up a KPI Project charter and add your descriptions now; because I highly doubt anyone will do it later.
If you ask other organizations or peers what they use for KPIs, you may be missing the most valuable resource when it comes to deciding on which ones to carry out. Your stakeholders and customers define your success so why are you asking other PMOs which KPIs they are using? If PMO KPIs were a standard, then that question wouldn’t be asked so many times.
Ever been in an organization where the PMO is well-respected and often seen as one of the best resources? I didn’t think so. Seen many instances where the PMO is often called the expert in your organization for excellent management and efficient project management processes? It’s not usually and from the research I’ve read, it’s practically never.
In the Project Management Institute (PMI) organizations Pulse of the Profession 2018 report, they noted that only 58% of organizations understand the value of project management. Add the PMO as a governing layer on top of that misunderstood value, and you have a big challenge in changing the mindset. You won’t do it without some form of credible performance management.
KPIs that you’ve built, communicated, established and are continually monitoring can help change that mindset. When your customers and stakeholders are integral to the KPI development, then ownership and value increase. Your projects have a cadence no matter how short, or long they go. That cadence needs to be measured.
Another interesting item of note in the PMI Pulse of the Profession report was the increase in scope creep that is clear from 2016. The scope creep trend only appears to be increasing. Can this have something to do with rapidly changing technology or things like project methodologies that tend to have open-ended requirements? [Figure 6 PMI Pulse of the Profession] The mindset of initial open-ended requirements in technology projects isn’t going to change; but how you measure their success will. The PMI report also focuses on one of the capabilities that many PMO’s struggles with: value delivery. It doesn’t matter how you built requirements or if you smacked a success sticker on the project folder – if your project didn’t have a value associated the sunk costs of project execution will be the demise of the PMO. Outsourced PMOs and project delivery teams already do that.
Enable your KPI development effort with the customer and stakeholders. If you don’t remember anything else in this blog post, this is critical.
While you can use scope, cost, and schedule as your basic KPI measurements, you will be lost in the operational cadence of project execution. Your team needs to think outside of the box and using feedback from the project and portfolio stakeholders you’ll get closer to perfecting KPIs over time. Here is the key: the metrics you define should always be focused on performance against business measures. KPIs should also facilitate collaboration, communication, and continuous improvement.
Pretty simple, right? It is, the challenging part is finding the organizational baselines. For example, project lead time. How long does it take, on average, to complete a project at your company? How many bottlenecks were there? How often does work stall? How many delays or missed estimates occurred?
Lead time is a pretty basic KPI when you think about it but when is your lead time terrible and when is it perfect? Starting with arbitrary baselines won’t help. You need to know where you stand now.
Basic PMO KPI Kit
I propose three basic KPIs for PMOs are Lead Time, Consistency, and Customer Satisfaction as your starter kit.
KPI: Lead Time
I know what you are thinking; that’s so lean manufacturing of you. Quite, but let’s face it, the business wants a product, and it’s up to the technology PMO to deliver it. You need to measure from project kickoff to delivery and all the hills and valleys in between. While your product isn’t a widget produced every x cycle, the value of time and resources can be used to establish a baseline. Call it a framework. No two projects are alike, but there are similarities when it comes to used resources, risk, value, and returned benefit.
As a PMO exercise, conduct a project execution analysis and associate project timelines with a funding value, number of resources used, number of issues/risks during execution, the length of phases and adding effort values to activities in projects. Acquiring funding through the procurement process has less effort value than building software requirements.
Does your PMO know what it is capable of delivering? How much variation exists in your typical project constraints? I’d wager that it’s usually specific skill sets and outside processes that are impacting your delivery. How confident is the PMO in estimation? How many times does the PMO break its promises?
Your KPI team need to complete a capability and capacity analysis to understand what the PMO is capable of. The team should work up a variance analysis and review project trends to understand performance over time. These are the initial benchmarks you need, and they will be revisited and adjusted as the PMO performance improves.
KPI: Customer Satisfaction
I don’t think we need too much detail here. If you’ve read this far, you are really in tune with what the PMO customers satisfaction level is, or you know that PMO has broken its commitment of delivery and communication is out of whack. There is only one direction to go, and that is up!
Host a customer focus group discussion regularly until you understand what your customers expect and how you can measure that. Gaining confidence in the PMO means benchmarking this vital performance, improving it over time, delivery on commitment, communicating it, and remaining in lockstep with your customers. A key side benefit? You’ll get more business, more resources, and avoid the stale PMO flavor.
Think Outside the PMO Box
There are many other KPIs that the PMO can investigate in their maturity and improvement journey. Remember that any KPIs you choose, that less is more. Start with the basics above – once you start delivering improvements and the business values your success than other KPI development (don’t forget communication!) with the customer has a lot more meaning.
I have learned to categorize these things in eight buckets. You don’t need all of these, but they should get your KPI team enthusiastic enough to get started on analysis. They should have meaning to your organization, are understood by and customer, help build a consensus among project teams and fundamentally return value. These buckets are:
Governance, Portfolio Management, Project Management, Resource Management, Return on Investment (ROI) ( or Benefits Realization), Staff, Stakeholder Management, and Strategic Contribution.
Think about which buckets make more sense in your organization and have more value in the culture you are now in. In a Digital Transformation world then I’d bet strategic contribution may be a critical bucket. Three of those buckets are good starting points to start mind mapping your PMO KPIs:
Time to market is a KPI but how does PMO fit into that? Knowing how long you need to start a project, time to deliver the project (deliverables), and how good the PMO is in estimating delivery are essential. What is the average elapsed time from project idea to project start? How long does it take from conception to project close (or delivery of technology)? The answers to these questions are the building blocks for your time to market KPI.
Staff is the least used but often is the most important. You need to be able to show your customers how investment in your project staff pays off with project success and delivery. How many organizations have you joined to be told that they offer x amount of Project Manager training or skills-building per year? Only to find out you end up in another risk management 6-hour training course once a year. Demonstrate the value of entrepreneurial Project Managers, invest in soft skill-building, and set a benchmark for your Project Management teams. Do PMP certifications mean the faster execution of projects? No. Leaders who have an innate sense of urgency execute projects faster and more efficiently. Those leaders are developed over time.
ROI is often called benefits realization in some organizations. Some projects have no dollar value to be returned. One project may promise the company millions of dollars in return over the next three years but how is your PMO linking that back into the performance measurements? You might find that in some structures it is the businesses pursuit to manage the return on value and that the PMO only functions for project delivery. This is why PMOs become process governors. At the same time, the most disregarded process governor. Become the partner in understanding how the business expects to measure return or benefits after project delivery. Have a clearly defined measurement that both business (customer) and PMO understand and agree on.
The KPIs discussed above are only examples and building blocks to kick off your KPI analysis. Borrowing other PMO KPI measurements may work but having the ones that define and support your vision are more important. Partnering with the business or customer is integral to permanent PMO KPIs that show how you are improving and meeting business goals can be achieved by investing in time to understand what they should be.
That is your vision: How does the PMO help the organization fulfill its strategic goals? The PMO does this through efficient and rapid execution of programs and projects to delivery technology in the organization. It’s Technology Project Excellence.
Now go work out how you are going to do that. Measure it with KPIs.