ce en er nf co le Te

PMO Executive Council™
Research Teleconference 18 June 2008, 12 p.m.–1 p.m. EDT

State of the PMO Function

Featuring: • Current PMO Trends • Priorities for 2008–2009

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Legal Caveat
The PMO Executive Council has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from many sources, however, and the PMO Executive Council cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the PMO Executive Council is not engaged in rendering legal, accounting, or other professional services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither the Corporate Executive Board nor its programs are responsible for any claims or losses that may arise from a) any errors or omissions in their reports, whether caused by the PMO Executive Council or its sources, or b) reliance upon any recommendation made by the PMO Executive Council.

Road Map for Today’s Discussion
PMO Functional Trends

The Ascendance of the EPMO

Pressure to Boost Resource Productivity

Heightened Interest in Benefits Realization Tracking

PMOEC1A8YAXV

© 2008 Corporate Executive Board. All Rights Reserved.

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pushing to move beyond delivery of functionality to delivery of benefits.Emergent PMO Trends PMO leaders are demonstrating a strong interest in growing their value perimeter. and become a center of excellence for resource management… PMO Competencies of Highest Importance and Least Effectiveness PMO Executive Council Maturity Diagnostic …while the Enterprise PMO model continues to grow in popularity PMO Executive Council EPMO Cohort As a Percentage of PMO Executive Council Membership Average Maturity Gap High Project Management Tools and Methodology 2006 Project Manager Incentives 20% Importance Project Manager Coaching and Development Project Selection PMO Performance Reporting Stakeholder Partnership Benefi ts Assessment and Tracking Organizational Structure Project Manager Hiring Vendor and Methodology Training Outsourcing Management End-User Adoption Readiness Assessment PMO Mandate Definition Project Staffing Portfolio Resource Monitoring 2007 30% Project Performance Reporting Project Manager Performance Assessment Portfolio Data Collection and Reporting 2008(E) 40% Portfolio (Re)Prioritization High Low Low Maturity Gap (Importance—Effectiveness) Source: PMO Executive Council research. PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved. 4 .

PMOEC1A8YAXV © 2008 Corporate Executive Board. 5 .State of the PMO Function Top of the Priority List for Second Half of Year Challenges to PMO Success 1 Enterprise coordination for large-scale programs Challenge 2 Anticipating and mitigating project resource bottlenecks 3 Improving clarity on returns on project investments Current Trend The Ascendance of the EPMO Pressure to Boost Resource Productivity Heightened Interest in Benefits Realization Tracking Source: PMO Executive Council research. All Rights Reserved.

All Rights Reserved.Road Map for Today’s Discussion PMO Functional Trends The Ascendance of the EPMO Pressure to Boost Resource Productivity Heightened Interest in Benefits Realization Tracking PMOEC1A8YAXV © 2008 Corporate Executive Board. 6 .

2006–2007 Percentage of Companies 2006 2007 Eighty-two percent of EPMOs manage budgets greater than $1 million. n = 26. PMOEC1A8YAXV CIO/CTO/ Governance COO or Operations CFO or Finance Functional Heads CEO or Head of Subsidiary Strategy © 2008 Corporate Executive Board. 7 . All Rights Reserved.000 n = 22. up 5% from 2006.000–$1 Million $1 Million– $5 Million $5 Million– $10 Million More Than $10 Million …and report beyond the IT function EPMO Reporting Relationships Percentage 31% 23% 15% 15% 8% 8% Sixty-nine percent of EPMOs report outside of IT.The Ascendance of the EPMO State of the EPMO EPMOs maintain authority over large budgets… EPMO Budget Managed. 32% 32% 36% 36% 14% 5% Under $500. 14% 9% 9% 14% $500.

. 8 Source: PMO Executive Council research. All Rights Reserved.The Enterprise PMO EPMO Architecture Infrastructure Applications and Operations Support Shared Resource Pools Non-IT IT Business Unit PMO Functional PMO IT Governance Activities and Accountabilities Portfolio Planning Creating the Portfolio Management Framework Aligning with Business Partners Setting Allocation Levels Across Portfolio Asset Classes Screening Business Ideas for Strategic Fit Developing Business Cases Defining Project Requirements Prioritizing the Portfolio Process and Methodology Governance Developing Resource Management Processes and Standards Tracking and Reporting Key Metrics to Business Partners Reviewing Cross-Functional Projects at Stage-Gates Selecting a Resource Management Tool Enforcing Resource Management Processes and Standards Managing Multiple Vendors Capacity Planning Monitoring Key Delivery and Quality Metrics Reconciling Skills Proficiency with Role Requirements (Re)allocating Resources to Projects Estimating Demand Owned: The PMO has complete decisionmaking authority for this activity PMOEC1A8YAXV Consulted: The PMO influences decisions with analysis and recommendations © 2008 Corporate Executive Board.

9 . INC.executiveboard.Reporting Maturity Curve Download the EPMO Metrics and Reporting Toolkit at www. All Rights Reserved.com Maturing Toward Business Value Evolution in EPMO Metrics PMO Executive Council Analysis 3 Business Outcomes Assessing Portfolio Returns Sample Metrics: • Portfolio ROI • Dollars of generated revenue • Dollar efficiencies gained • Cost avoided from automation efforts • FTE Savings 2 Focus of EPMO Activities 1 Standardizing Process Sample Metrics: • Percentage of PMs using standard methodology • Percentage of PMs attending methodology training classes • Percentage of BUs using standard PM job descriptions Process Inputs Low Delivering Projects Successfully Sample Metrics: • Percentage of sponsors satisfied with delivered projects • Percentage of projects delivered on-time • Percentage of projects delivered on-budget • Rework as a percentage of total project work High Relative Cost of Measurement With Sincere Appreciation CISCO SYSTEMS. Source: PMO Executive Council research.pmo. PMOEC1A8YAXV © 2008 Corporate Executive Board.

10 .Road Map for Today’s Discussion PMO Functional Trends The Ascendance of the EPMO Pressure to Boost Resource Productivity Heightened Interest in Benefits Realization Tracking PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.

just do it for 20% less!” CFO Pharma Company PMOEC1A8YAXV © 2008 Corporate Executive Board. competition is brutal. Source: CIO Executive Board research. So I don’t want to hear about our limited capacity for new projects—I don’t care how you do it. All Rights Reserved. n = 145. Source: PMO Executive Council research. To survive. I need it done. 11 . we all have to find ways to deliver more with fewer resources. Just Get It All Done “Input prices are at historic highs.13% 2007–2008 Increasing Pressure to Accelerate Speed to Market 67% 2006–2007 (7. and our margins are under tremendous pressure.” Business Unit GM Services Company Get It Done for Less “I don’t care what you do.45%) n = 33.View from the Corner Office No Excuses Business tolerance for delivery lapses is at an all-time low… Current Business Customer Expectations Percentage of Respondents …just as the traditional options for accelerating delivery are no longer available Contract Employees Percentage Change in Headcount Very Low Tolerance for Projects Not Delivered on Time and Budget 89% 14.

The Technologist 1010101010101010 What Tools Can’t Do Secure executive support Identify effective resource management processes Tools are Necessary not Sufficient Tools are the Solution! “Once we finish our PPM implementation.Pitfalls to Avoid Three Myths About Increasing Resource Productivity The Myth 1 The Process Hound 1. . . The Reality Drivers of PM Effectiveness Ownership and Commitment Learning Agility Risk Management The Lesson More Methodology Does Not Mean More Productivity More Process Adoption is Better “If people followed our methodology more consistently…” 2 Process Adherence n = 65. 12 . . More Visibility not More Control Control Over Resources is Key “If only I could get more control over resources…” n = 60. 2. PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved. 7. 3. we’ll be able to…!” 3 Ensure data quality The Empire Builder Projects That Cut Across Business Units Percent of Projects in Portfolio Single Business Unit 26% 74% Two or More Business Units Source: PMO Executive Council research.

13 .0M $2.1M $4.3M $2.2M $2. © 2008 Corporate Executive Board.1M $100M Portfolio Budget (A) Lost Time to Respond (B) Resource Ramp-up (C) Resource OverUtilization /Burnout (D) Unplanned Staff Augmentation (E) Unplanned Outsourcing (F) Understaffed Maintenance V Inability to Anticipate Resource Bottlenecks ($13.The Size of The Prize Implementation Guide in Appendix. PMOEC1A8YAXV Source: PMO Executive Council research. All Rights Reserved.7M $1.1M Unplanned Staffing to Resolve Bottlenecks $8.5 Million) 33% II III Lost Productivity on Completed Projects $3.5M $0.1M Lost Productivity on Ongoing Projects $6.3 Million) $100M Portfolio Cost (G) Rework (H) Unplanned Attrition * Costs are based on $100 million portfolio and two bottlenecks per project per month .3M $3.3M 67% Relieve Bottlenecks ($6.1M Key Drivers of Ineffective Resource Management VI Inability to Quickly $17. Reducing Resource Bottlenecks: A $20 Million Cost Savings Opportunity Impact of Resource Bottlenecks on Portfolio Cost* IV Rework and Unplanned Attrition $2.1M Cost (Millions of Dollars) 1 $4.

executiveboard. Chicago. Calif. As with all PMO Executive Council meetings. Chicago. leadership briefings expose high-performing staff and emerging PMO leaders to select executive retreat practices in a one-day session.V. Feel free to contact the PMO Executive Council with additional questions either by e-mail at PMOExecutiveCouncil@executiveboard.C. Washington. All Rights Reserved. Ill. visit our Web site at www.com or by phone at +1-866-913-8101. Executive Retreat for EPMO Principals 31 July. 4 December. 21–22 October.com and click on the Meetings and Teleconferences tab.Y. New York.: PMO Executive Council E-Mail: PMOExecutiveCouncil@executiveboard. 14 . there is no charge for attendance.pmo. D. 9–10 September. Ill. R. Palo Alto.S.PMO Executive Council™ 2008 Meeting Series Redefining Resource Governance Boosting Resource Productivity to Deliver High-Quality Projects Executive Retreats for PMO Principals Designed to allow peer-level interaction among PMO leaders. N. Registration Information To register for a meeting. 7 October.com PMOEC1A8YAXV © 2008 Corporate Executive Board. the executive retreat meetings are reserved for the seniormost PMO executive at member institutions.P. Leadership Briefings for PMO Staff Designed for key PMO staff.

15 .Road Map for Today’s Discussion PMO Functional Trends The Ascendance of the EPMO Pressure to Boost Resource Productivity Heightened Interest in Benefits Realization Tracking PMOEC1A8YAXV © 2008 Corporate Executive Board. All Rights Reserved.

Migrating to Benefits Tracking Partnership PMOs seek to facilitate business case realization tracking… What Is Your PMO’s Role in Tracking Business Case Realization? 2008 Council Survey Current Role Desired Role …to drive a multitude of expected benefits What Is the Main Benefit That Your Organization Expects from Improving Business Case Realization Tracking? 2008 Council Survey 73% 29% 26% 23% 47% 19% 29% 19% 3% No Involvement 20% 5% Collaborate with Finance Staff (or Another Function) to Help Facilitate the Tracking Lead the Tracking Ability to Drive Business Accountability for Benefi ts Realization Ability to Focus Senior Executive Attention on Harvesting the Full Benefi ts of Project Investments Better Quality of Information for Project Selection Decisions Visibility into the Overall Returns of the Whole Portfolio 3% 3% Merely Provide Data Improved Estimation Accuracy via Historicals and Retrospectives Source: PMO Executive Council research. PMOEC1A8YAXV © 2008 Corporate Executive Board. 16 . All Rights Reserved.

Factory Uptime 13. Hardware/Software Avoidance 9.com Portfolio-Level Business Value Map Intel’s Value Dial Map 1 Project benefits are expressed in business terms. PMOEC1A8YAXV © 2008 Corporate Executive Board. Open New Markets 16. Unit Cost Avoidance 12. Days of Inventory 2.pmo. Risk Avoidance Value standardization across BUs enables the portfolio’s contribution to each value dial to be tallied x x x x x x x x 1% 1% 10. Down the Wire Benefits Cash Cycle Working Capital Reductions Expense Reductions Metric 1.executiveboard. Headcount Turnover 6. Consolidations Intel Exposure x Probability of Occurrence x x 3% 7% 5 x x Efficiencies 8. CIO Executive Board research. Reserves Actual Cost Avoided from Factory Automation Efforts Ex: $/hr of Factory Downtime Avoided (Unconstrained)/ $/hr (Constrained) $ per Each % Point of Reserves Reduction Over and Above Lower Inventory Savings from DOI Impact $/Week Increased Volume x Appropriate ASP for Market and Product x Appropriate Margin Rate Incremental ASP or VOI x Appropriate Margin Rate Cross-Selling Products of Multiple Divisions and Acquisitions x x x x x x x Profit Margin 14.Assessing Portfolio Returns Download Intel’s Finite Enterprise Wide Value Metrics Case at www. Cross-Selling x x x x x 10% 15% 5% 12% 13% Opening Markets VOC 18.5% 7% 11. 2 Standard metrics Standard metrics definitions ensure definitions ensure project comparability. Opt Existing Market 17.5% 1. Payroll. 17 . project comparability 3 Inventory Management Systems Planning Systems Project Type Supplier-Facing Supplier-Facing Materials/Procurement Systems Technical/Product Document Exchange Applications Employee Facing Employee Facing Employee Web Tools Conveyance of Product Information A/P. Headcount Reduction Description $M/Day Balance Sheet Impact [$M per Year] $M/Day Balance Sheet Impact [$M per Year] Number of HC Reduced or Avoided x Avg Burden Rate x x x x Financial Total Value Toward Dial* 0% 2% x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x 4% 9% 6% 4. Headcount Productivity 50% x (Number of HC Reduced or Avoided) x Avg 5. 2) Reverse Action Lower Prices. System End of Life 7. 3) Supplier Consolidation/Volume Actual Hardware and Software Cash Avoidance from Infrastructure Decisions. All Rights Reserved. * Data are illustrative. Days of Receivables 3. Source: Intel Corporation. Materials Discounts $ per Turnover Avoided Incremental Dollar Cost of Displaced System per Each Actual Incident Discounts from 1) Contractual Early Pay. Other Cost Avoidance Actual Cost Avoided from Unique Automation Efforts Cost of Sales x x x x x x x x x x 3% 0. Stock Programs Delivery Systems Uptime/Reliability/ Design Map provides a a Map provides holistic view of the holistic view of the entire portfolio. Time-to-Market 15. Voice of the Costumer Qualitative VOC Score x x x 4 Granular drivers of business value are identified for each project type. entire portfolio Order Management and Customer Support Mergers and Acquisitions x x x x x Customer Customer Facing Facing Infrastructure Infrastructure Remote.

000 Project Request # Scott1234 Project Sponsor: Brian Project Hannah CRM IT Project Manager: Name: Reed First Benefits Assessment: 05/15 Project IT Request # Project Sponsor: Finance Scott1234 Brian Benefits Assessed By: Date of Assessment: IT Benefi Manager: Smith Responsible forProjectts: Project Name: Reed First Benefits Assessment: 05/15 Jack Hannah CRM Benefits Assessed By: Project Sponsor: Finance Scott Brian BenefiIT t Confidence/Probability Hard Benefits ($ or Jack Responsible for Projectts: Hours) Smith Reed (Circle One) Assessment: 05/15 IT Benefi Manager: Hannah First Benefits $1. Inflation 3. All Rights Reserved.000 Benefits One-time $500.000 __________________________ Total Benefits to date $550.000.000 __________________________ Total costs to date $900. Price Increase 4.executiveboard.Case Excerpt: Selective Benefits Audit Download Armstrong World Industries’ Integrated Benefits Tracking Case at www. Seasonality 2.com Trust.000 (100%) (90%) (60%) (60%) (30%) (30%) Cost Reduction Benefit (100%) (90%) dence/Probability Confi Hard Benefits $1.000 Margin $500.000 Annual $100.pmo.000 (90%) (60%) (60%) (30%) (30%) Cost Reduction Soft Benefits (Circle One) (100%) (100%) (90%) Sales Working Capital Reduction ($) Hours $1.000 Jack (100%) (60%) Sales Responsible for Benefits: Hours) Smith (90%) (Circle One) (30%) $1. but Verify Armstrong ranks proposed projects… …and segments the portfolio to deliver scrutiny proportional to project value… Area Logistics Fulfillment Marketing HR Project Project 1 Project 2 Project 6 Project 7 Financial Business Unit Probability of Rank Return (40%) Impact (30%) Success (30%) 1 2 29 30 80+ hours (575 Projects) Most Valuable (25 Projects) Benefits Self-Assessment and Controller Audit Benefits Self-Assessment and PMO Review = High = LOW < 80 hours (900 Projects) Benefits Self-Assessment …with a controller certifying the benefits of the top 25 to ensure they accurately reflect the impact of external factors Internal Assessment Project Request # Project Name: 1234 CRM Date of Assessment: Date of Assessment: External Assessment Benefits Adjustment 1.000(100%) (100%) (100%) (60%) (60%) (60%) Productivity (hours saved) (60%) (30%) Cost Soft Benefits (Circle Priority: $500.200. Price Mix (1%) 2% 1% 3% Costs One-time $800.000 Sales $400.200.000.200.000 One) (100%) (90%) High Medium Low Government/Legal Reduction Working Capital Reduction 1000 $400. PMOEC1A8YAXV © 2008 Corporate Executive Board.000.000 (90%) (90%) (90%) (30%) (30%) (30%) 1000 $400.000 ($ or Hours) (90%) (90%) (Circle One)(30%) (100%) (100%) (60%) (60%) (30%) Working Capital Reduction ($) $1.000 IT Finance (90%) dence/Probability (30%) Margin Benefits Assessed By: Benefit (100%) Confi (60%) Hard Benefits ($ or $1.000 Margin $500. 18 . PMO Executive Council research.000 Annual $50.000(100%) (100%) (90%) ($) (90%) (60%) (60%) (30%) (30%) Productivity (hours saved) Visibility: Hours High Medium Low External Customer Customer: Soft Benefits (Circle One) Low Major Non-Major Requirement Priority: High Medium Government/Legal Major Risk Medium Risk Low Risk (60%) 1000 High Medium Low (100%) (90%) (30%) saved) Visibility: External Customer Repair/Replace Productivity (hoursVendor Support Drop Hours Platform Elim Customer: Major Non-Major Requirement (Includes Tech Services Priority: High Medium Low Productivity Government/Legal Infrastructure) Major Risk Medium RiskCost Reduction Low Risk Visibility: High Medium Low External Repair/Replace Customer Vendor Support Drop Platform Elim Customer: Major Non-Major Requirement (Includes Tech Services Productivity Infrastructure) Cost Reduction Major Risk Medium Risk Low Risk Repair/Replace Vendor Support Drop Platform Elim (Includes Tech Services Productivity Infrastructure) Cost Reduction Adjusted Benefits = 5% Source: Armstrong World Industries.

19 . 2 Create a consistent vocabulary for project-related benefit measures—Selectively scrutinize reported benefits for the most valuable projects in the portfolio to avoid double-counting. 3 Use benefits tracking as both a carrot and a stick—Use status reports on project benefits realization to focus executive-level discussions on how to realize project value when barriers are outside the PMO’s control. and determine what data must be collected.Key Learnings for Benefits Realization Tracking Success Without a mechanism to track benefits realization post–project implementation. but for the total business value a project provides. and by whom. 4 Start with the end in mind—Establish the metrics plan at the outset of the business case to identify which metric(s) will be used to value the project. The reports may also be used to track estimation success to coach executives on improving estimation. PMOs can play an important role in facilitating the execution of the assessments. set a baseline for measurement. consequently. While PMOs are not necessarily the logical place to locate responsibility for conducting benefits assessments. 5 Leverage Finance’s expertise—Partner with the finance department to enhance credibility of reported benefits. Key Insights 1 Drive business accountability for benefits realization—Set an expectation that sponsors will self-assess benefits realization for all projects and partner with IT Finance to drive standardized benefits assessment for the highest value projects. Review project outcomes not for IT’s contribution. PMOEC1A8YAXV © 2008 Corporate Executive Board. the value of the PMO. firms struggle to understand the value of the portfolio and. and adjust for macroeconomic factors that may obscure true benefits realization. 6 Simplify participation requirements and expectations—Design a benefits realization process that is easy to complete at the project team and project sponsorship levels to maintain executive engagement. All Rights Reserved.

All Rights Reserved. PMOEC1A8YAXV © 2008 Corporate Executive Board.State of the PMO Function Top of the Priority List for Second Half of Year Challenges to PMO Success 1 Enterprise coordination for large-scale programs Challenge 2 Anticipating and mitigating project resource bottlenecks 3 Improving clarity on returns on project investments Current Trend The Ascendance of the EPMO Pressure to Boost Resource Productivity Heightened Interest in Benefits Realization Tracking Source: PMO Executive Council research. 20 .

All Rights Reserved.Appendix Resource Bottleneck Impact Calculator PMOEC1A8YAXV © 2008 Corporate Executive Board. 21 .

22 . Parameters. All Rights Reserved.Resource Bottleneck Impact Calculator Appendix Resource Bottleneck Impact Calculator List of Assumptions. Inputs. and Outputs Scenario Analysis Results Key Takeaways PMOEC1A8YAXV © 2008 Corporate Executive Board.

Cost of unwanted staff attrition 2. Total new development project portfolio budget = $100M b. Productivity loss due to resource ramp-up time c. Portfolio Composition by Project Size: 55% Small projects. All Rights Reserved.Implementation Guide Resource Bottleneck Impact Calculator Inputs and Outputs Inputs 1. large) = $250K small. Itemized list of costs due to resource bottlenecks in the portfolio. 20% Large projects d. Cost of a project by project size (small. Unplanned staff augmentation e. Portfolio Characteristics a. Size of on-budget deviation for the portfolio PMOEC1A8YAXV © 2008 Corporate Executive Board. Cost of: a. medium. 25% Medium projects. Unplanned maintenance” g. $500K medium. Total number of projects in the portfolio = 220 c. Unplanned outsourcing f. 23 . Relative size of costs incurred due to resource bottlenecks in the portfolio 3. Cost of rework—additional maintenance due to break-fi x caused by rework resulting from bottlenecks h. Productivity loss due to resource heroics (Over-Utilization/Burnout) d. Lost time to respond b. $1M large 2. Average number of bottlenecks per project per month = 2 Outputs 1.

c.25 Augment staff using contractors = 0. Duration of a project by project size (small.67 Fully loaded annual cost of non-commodity internal FTE = $100K Fully loaded annual cost of commodity internal FTE = $75K Fully loaded annual cost of non-commodity outsourced FTE = $55K Fully loaded cost of non-commodity outsourced FTE = $40K Premium for rapid staff augmentation = 5% of fully loaded annual labor cost Premium for rapid outsourcing = 10% of fully loaded annual labor cost Assumptions 2. b. Productivity of resource who is ramping up: week 1 = 30%. a. e. All Rights Reserved.25 Reallocate tasks to staff within project = 0. week 2 = 70%. Number of FTEs on a team by project size (small. large) = 5 FTEs small. 1% for productivity loss of less than 1% 7. c. f. week 3 = 55% 6.25 Re-sequence tasks within a project = 0. 2% for productivity loss of 1%-2%. week 3 = 70% 5. Bottleneck Severity 3. a. Bottleneck Frequency a.25 4. d. Additional frequency of bottlenecks due to unplanned maintenance per month = 25% PMOEC1A8YAXV © 2008 Corporate Executive Board. b. Productivity of rest of the team during ramp-up time: week 1 = 120%. b. 36 weeks medium. medium. large) = 24 weeks small. 20 FTEs large 2. Unwanted attrition rate = 4% for productivity loss of higher than 2%. e. medium.Implementation Guide Resource Bottleneck Impact Calculator Assumptions and Parameters 1. week 2 = 50%. 48 weeks large 3. d. Probability and cost impact of applying each of the following techniques for relieving a bottleneck: a. d. Obtain outsourced resources = 0. Number of bottlenecks encountered per project per month = 2 Maintenance bottlenecks as a percentage of the total number of bottlenecks per project per month = 10% Bottleneck size in FTEs = 1 FTE Number of weeks an FTE is not utilized due to a bottleneck = 1 week Number of weeks it takes an FTE to ramp up to a new assignment = 3 weeks Number of weeks it takes to complete a bottlenecked task once an FTE is assigned to it = 4 weeks Probability that bottlenecked resource is a non-commodity resource = 0. b. c. 24 . 12 FTEs medium. Labor Costs to Relieve Bottlenecks Parameters 1. Percent of rework generated per bottlenecked FTE for duration of time it takes to complete a task = 10% 8.

Unplanned Staff e. Augment Staff Using Contractors 3. Lost Time to Respond 1. Re-Sequence Staff Within a Project c. team productivity. Obtain Outsourced Resources Tactics to Relieve Bottlenecks 2. and impact of bottleneck-relief actions on portfolio costs Productivity of Team Over Time Productivity (%) 100% Productivity of Additional Resource Productivity of Rest of the Team Week 1 Week 2 Week 3 Ramp up time Average Productivity of Additional Resource Average Productivity of Rest of the Team 30% 50% 70% 120% 70% 55% Cost Categories Due to Not Anticipating or Quickly Relieving Bottlenecks Lost Productivity b. Resource Ramp-Up f. Unplanned Maintenance Source: PMO Executive Council research. Reallocate Tasks to Staff Within Project 4. PMOEC1A8YAXV © 2008 Corporate Executive Board. 25 . Resource Over-Utilization Unplanned Staffing d. All Rights Reserved.Implementation Guide Resource Bottleneck Impact Calculator Estimation accuracy. Unplanned Augmentation Outsourcing a.

Hidden Costs (G) Rework (H) Unplanned Attrition — — — — Source: PMO Executive Council research. Inability to Anticipate Resource Bottlenecks II. Unplanned Staffing (D) Staff Augmentation (E) Unplanned Outsourcing 3. Unplanned Maintenance (F) Unplanned Maintenance 4. All Rights Reserved.Implementation Guide Resource Bottleneck Impact Calculator Primary Drivers of Resource Bottlenecks I. PMOEC1A8YAXV © 2008 Corporate Executive Board. Lost Productivity (A) Lost Time to Respond (B) Resource Ramp-Up (C) Resource Over-Utilization 2. 26 . Inability to Embed Resource Versatility Cost Categories 1.

Portfolio size: $100M. All Rights Reserved.8 0.8 2. Number of weeks it takes to complete a bottlenecked task once an FTE is assigned to it 5.2 53. Number of weeks it takes an FTE to ramp up to a new assignment 4. 20% Large projects ($1M) 3. Composition: 55% Small projects ($250K) .8 80% Model Assumptions 1. Average number of bottlenecks per project per month = 2 4. New development projects and maintenance requests use a common pool of resources. Fully-loaded annualized labor costs: • Non-commodity internal FTE = $100K • Commodity internal FTE = $75K • Non-commodity outsourced FTE = $55K • Commodity outsourced FTE = $40K 6. PMOEC1A8YAXV © 2008 Corporate Executive Board.7% High Bottleneck Severity 1. Number of weeks an FTE is not utilized due to a bottleneck 3. Source: PMO Executive Council research.2 3.4 3. 220 projects 2. 27 .2 1. Maintenance bottlenecks as a percentage of the total number of bottlenecks per project per month = 10% 5. Probability that the bottleneck is non-commodity Low Bottleneck Severity 0.3% Medium Bottleneck Severity 1 1 3 4 66. 25% Medium projects ($500K). Bottleneck size in FTEs 2.Implementation Guide Resource Bottleneck Impact Calculator Quantifying Bottleneck Severity Drivers of Bottleneck Severity 1.6 4.

Implementation Guide How Bottleneck Severity Affects Portfolio Costs An Evaluation of Three Bottleneck Severity Scenarios Impact of Resource Bottlenecks on Portfolio Cost Average Number of Bottlenecks Per Project Per Month = 2 Conservative Savings Opportunity (Low Severity Bottlenecks) Average Savings Opportunity (Medium Severity Bottlenecks) 6.2 (A) Lost Time to Respond (B) Resource Ramp-up (C) Resource Over-Utilization /Burnout (D) Unplanned Staff Augmentation (E) Unplanned Outsourcing (F) Unplanned Maintenance (G) Rework (H) Unplanned Attrition Source: PMO Executive Council research.5 3.3 2.1 0.7 2.2 5. 28 .1 3.9 Aggressive Savings Opportunity (High Severity Bottlenecks) 4.1 1. PMOEC1A8YAXV © 2008 Corporate Executive Board.5 2.9 1.3 1.0 Cost (Millions of Dollars) 4.2 1. All Rights Reserved.3 0.7 1.8 2.3 3.1 2.4 2.6 2.7 3.3 0.6 0.

Inability to Quickly Relieve Bottlenecks Adds $6. Fully-loaded annualized labor costs: • Non-commodity internal FTE = $100K • Commodity internal FTE = $75K • Non-commodity outsourced FTE = $55K • Commodity outsourced FTE = $40K 6.1M—Capacity plans that ignore resources for maintenance lead to understaffing on maintenance tasks. and TransCanada use repeatable project effort estimation techniques to build reliable capacity plans that provide early warning of gaps between supply and demand throughout the project life cycle. Instead of tapping into contractors and outsourced staff. Inability to Anticipate Resource Bottlenecks Adds $13. building maintenance resources into the capacity plan. and TransCanada minimize these costs by consistently sizing demand.1M—Staff augmentation is a common but expensive bottleneck resolution technique. 20% Large projects ($1M) 3. Unplanned Staffing to Resolve Resource Bottlenecks Costs $8. Rework and Unplanned Attrition Costs $2. New development projects and maintenance requests use a common pool of resources. II III IV V VI * Ranges are calculated based on 1-3 bottlenecks per project per month. Source PMO Executive Council research.4 Million to the Portfolio Budget—Exemplars like Marriott. All Rights Reserved. Exemplars like Goldman Sachs. and heroics rapidly erode staff productivity. Average number of bottlenecks per project per month = 2 4.5 Million to the Portfolio Budget—Exemplars like British Airways use existing competency maps to tap into the resource versatility of internal FTEs and avoid the use of expensive external resources. When bottlenecks occur. PMOEC1A8YAXV © 2008 Corporate Executive Board. Key Findings And Action Steps 1 Lost Productivity on Ongoing Projects Costs $6. Portfolio size: $100M. and Johnson & Johnson guard against rework costs and unwanted attrition by building a strong leadership bench that maintains high process maturity and staff engagement levels. Versign. First Data Corporation. overtaxed project staff. and the time it takes a new resource to ramp up are the key drivers of this decline in productivity. Composition: 55% Small projects ($250K). Work stoppage due to a bottleneck. staff shortages affect both ongoing projects as well as completed projects that require maintenance.1M—Resource bottlenecks lead to a significant decline in resource productivity. State Farm Insurance. Lost Productivity on Completed Projects Costs $3. 220 projects 2. the organization as a whole ends up paying the price of these “hidden” costs. Verisign. 29 .5M—Bottlenecks cause heroics. While these costs are typically not included in portfolio cost estimates. leading to sloppy work that requires rework and eventually to staff burnout and unwanted attrition.Reducing Resource Bottlenecks: A $20 Million Cost Savings Opportunity Assumptions 1. 25% Medium projects ($500K). Exemplars like Marriott. and systematically planning for scope change from the very start. exemplars like British Airways re-deploy internal resources with similar competencies to fi ll imminent needs or re-sequence project tasks to ease bottlenecks. Exemplars like Verisign use historical data to surface the key drivers of maintenance on their completed projects and factor in the time it takes to complete routine maintenance into their capacity plans. Maintenance bottlenecks as a percentage of the total number of bottlenecks per project per month = 10% 5.

D.com PMOEC1A8YAXV .executiveboard.C.pmo. • Chicago • San Francisco • London • New Delhi • Sydney w w w.PMO Executive Council Washington.

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