Where should a Project Management Office sit in a business?

 

Key Takeaways:

• To successfully complete its standardizing and enabling role, a PMO interacts with a wide array of operational and executive stakeholders.
• As a high-level, outcome-oriented function, the PMO often reports to the C-suite. This can be either the CEO or other senior leaders in charge of other strategic business aspects.
• In other enterprises, a dedicated PPM Governance Council is appointed to work with the PMO and provide guidance and oversight to PPM strategies.

The question of a PMO’s position within the organizational hierarchy ranks highly among the many challenges facing business and project professionals when creating or restructuring a PMO.

Where should a Project Management Office (PMO) sit in a business? How does it report up through the command ladder? Who should it turn to for guidance and support when needed?

As often when it comes to PPM choices, there is not a single correct answer. The size, line of business, and firm objectives will play an instrumental role in the placement of a PMO. Let’s explore the various options.

The PMO as a Relational Function

A PMO plays a decisive role in ensuring project success within the organization’s system, structure, and qualified staff. As part of this broad mission, many of the PMO’s responsibilities will involve other corporate functions. For example:

• The selection of the projects to be undertaken, deferred, or terminated
• The definition of project priorities
• The projection of revenues and effect on cash flow
• The alignment of projects with strategic objectives
• The evaluation of the value and benefits of the projects to the business
• The management of project and portfolio risk

And many more other activities that may require input and participation from senior officers including operation leaders, strategic planners, financial managers, sourcing and supply chain managers, marketing and human resources departments… The list is endless.

Add to this the fact that your typical PMO has a responsibility to train, coach, and provide guidance to all populations involved in project management and project work across the firm, and is therefore likely to interact with various departments and business units about project-management-related issues.

The bottom line is: as a cross-functional, enterprise-wide process, PPM involves a wide range of participants. As such, the PMO is bound to interact and collaborate with them.

PMOs and Senior Management

With their broad scope and varied responsibilities — and the highly strategic impact of PPM — many PMOs report to the CEO. This is especially true of Enterprise PMOs, which coordinate projects at the firm level. In contrast, Domain PMOs, Division PMOs, or Business Unit PMOs typically fall under the purview of region, portfolio, or department managers.

However, in some firms, the CEO may be unwilling or unprepared to oversee the PMO, in which case responsibility for the Project Management Office may go to another senior leadership function, such as the Chief Operating Office or the Chief Financial Office. It is actually quite common to see PMOs report up through the Chief Information Office or Chief Technical Office because of natural and cultural affinities between PPM and IT.

The PPM Governance Council

Not every C-suite knows how to sponsor and champion a PMO. Besides, CEOs, CFOs, COOs, CIOs and CTOs alike already have their specific territories to oversee. They might not have the time, resources, and skills required to focus on PPM effectively and successfully.

While the senior executives ultimately retain responsibility for PPM and should approve major decisions, day-to-day oversight may be delegated to a “Governance Council.” This council is responsible for the key decisions that affect the firm’s portfolio of projects.

Such a Governance Council may consist of one or several of the C-managers mentioned above or of their representatives — typically high-level managers.

When appointing a Governance Council to oversee and champion the Project Management Office’s activity, it is common practice to formalize and issue a PPM charter detailing:

• the purpose and nature of the PPM process
• the roles of the various participants
• the respective responsibilities of the Governance Council and of the PMO
• the escalation mechanisms dictating how and when to elevate issues and decisions to upper management

The interactions between PMOs and their Governance Councils

In addition to regular internal meetings, the Governance Council should frequently meet with the PMO in order to communicate and collaborate effectively. The objective is to make sure that the information required to select and prioritize projects and manage the pipeline is readily available and that all decisions are made based on this data.

Should anything go wrong — either because of technical impediments, reduced performance, budget or scheduling issues, or any other internal or external factors — the PMO is supposed to notify the Council by issuing a report that will possibly include recommendations. Working hand in hand with the Project Management Office, the Governance Council will then need to assess the situation, evaluating impact on cash flow and revenue and reviewing strategy alignment, risk, and priorities. Ultimately, the decision of deferring or killing projects falls within the scope of the Council.

So this governance model is based on a tight partnership between a business-oriented Council, and a more project-oriented PMO.

What if the PMO Ran the Business?

When we listed the possible C-suite sponsors for the PMO, we assumed that the organization didn’t have a VP-Projects or a Chief Project Officer (CPO). Although not widespread yet, these functions are gaining traction in project-focused firms. In any case, a constant is that the leadership and direction for the PMO usually come from the very highest levels of management.

As a matter of fact, we’re seeing many Project Managers Offices — especially Enterprise Project Managers Offices with an organization-wide reach — evolve their roles from operational monitoring into the provision of strategic data and insights to executive leaders. As they are becoming supporting and enabling partners of senior, C-level executives, it could make sense for such PMOs to join them to the Board as “Chief Insight Officers” — or even “Chief Transformation Officers” tasked with leading change and digitalization across the enterprise.

 

For further information about Project Management Offices and PPM, consider reading:

• What are the Different Types of Project Management Offices?
• What is the role of a Project Management Office?