To centralise or to not centralise? The core value of the PMO is in maintaining and cultivating better governance.
There are numerous ways that an organisation can shape how they deliver projects effectively and one of the critical considerations is how to best position the Project Management Office (PMO).
Once the decision has been made to invest in the capability a PMO can bring into an organisation, the next critical decision is whether it should be centralised (ie: the traditional Enterprise PMO) or to de-centralise its capabilities and effectively push the functions that support delivery out into different business units.
So what are the critical factors to consider in optimising where the PMO should reside within your organisation?
The PMO: A Question of Governance
Whether a business centralises or decentralises its PMO, there are some criticalities to consider.
The decision where to position the PMO should always be looked at through the prism of good governance. Effective governance – and portfolio management in particular – is an essential part of successful delivery, whether the PMO is centralised or not.
So what are the differences between a centralised PMO and a decentralised one?
Centralised PMOs typically houses the standard capabilities, like processes (including methodologies), tools, templates, and metrics. It will also have the higher value-add capabilities like governance, portfolio management, and prioritisation frameworks as well as HR responsibilities for all resources via centralised resource pools.
The de-centralised PMO model has the above higher value-add capabilities distributed within the business units, with project managers directly aligned to each business unit. As illustrated below, it’s a quite different approach:
The defining feature of how each model works in practice most often relates to budget – where is the money controlled from?
Centralised Budget vs Distributed Budget
When the budget is controlled centrally and aligned to the overall strategy of the organisation, then a central EPMO model is probably the best fit. However, if the budget is allocated out to individual business units to control and prioritise as they see fit, a de-centralised PMO is potentially more important. Either way, both approaches have their pros and cons.
Benefits of a centralised PMO
- Greater consistency can be driven into all delivery due to everything and everyone being under one roof
- Ability to better manage demand and assign resources where they are most needed
- Capability uplift by cycling centralised resources through different types of projects
- Economies of scale (and costs savings) by not having duplicated services
- Easier to deploy new standards and methodologies
- A better chance to build a sense of community due to the centralised nature of the resourcing model
Disadvantages of Centralised PMO
- Simply put its centralised strength is also its major weakness. With any centralised body, there can be a tendency for processes and approaches to become cumbersome or overly bureaucratic – the antitheses of a Lean or Agile environment. This can be a reality or a perception; both situations can be equally damaging, as the EPMO tries to be all things to all people.
Benefits of a De-centralised PMO
- The people at the business unit level are often more closely involved in the strategic decisions on which projects get funding, this can lead to better decision making
- There is greater nimbleness in said decision making and the ability to change course more effectively if required
- With the PMs being embedded into the business unit they become better accustomed to delivering in that environment
- Less overhead for the PM’s, particularly in the reporting space, as less centralised reporting and governance mandated
Disadvantages of a De-centralised PMO
- Simply put consistency; consistency of governance, consistency of decision making (in particular, which projects should be established) and also consistency of quality delivery.
Which is the Right Fit?
There is no single optimal shape for a PMO to take and often an organisation will switch between centralised and de-centralised models over the years as the needs dictate or new management is brought in with new ideas (which can in fact be old idea, but that’s a different article!).
Both approaches have their pros and cons. Time and appropriate consideration should be given to weigh up which model will best serve the business, which is unique and therefore the PMO should be fit for purpose.
What does not change is the benefit of good governance, sound project delivery principles and the purpose of the PMO, which is a clear understanding of what accountability means at the sponsor level, appropriate tools and processes and skilled PMs to deliver against the agreed scope.
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