HOW TO MEASURE THE VALUE OF YOUR PMO
By Keshia Cooper, PMP
According to a PMI/CIO Magazine Survey, 42% of Project Management Office’s (PMO) do not track metrics in the first year
of establishing a PMO. They also say that 23% do not track in the second year and 22% do not track in the fifth year.
Pitiful statistics for a group that should be the role model for measurements. So where do you start?
We should start by answering the question “What is PMO value?” PMO value can be defined as the contribution to business
performance, measurable benefit to stakeholders and general PMO support of organizational business goals. The value of the
PMO can be shown in many ways: money savings, increase in efficiency, increase of on-time delivery of projects, and
improved customer service, just to name a few.
In order to quantify the benefits of your PMO both hard and soft measurements should be included. There are several
different approaches to measuring PMO’s:
- Return on Investment (ROI)
- Creation of Value Standards
The measurement of Return on Investment for your PMO should be explored from many different angels. The basis of ROI in
measuring your PMO and the most common method utilized is measuring the financial bottom line. Measuring the bottom line
is the increase in revenue and the decrease of cost. The approach that should be utilized is to first define the business
drivers (convert those to monetary values) and establish a set of measurable criteria; this measurable criteria should then
be base lined and which allows the calculation of the benefits or the return to occur.
One approach to measuring the value of your PMO might include calculating the percent of projects on time and on budget
prior to the PMO and comparing that to the number of projects on time and on budget after the PMO. If your PMO office
sponsors training courses it is possible to use monitor the effectiveness of these course; this metric is another great
avenue to quantify return (see Appendix A for example by Harold Kerzner). Other areas to explore include: the reduction
in cycle time from kick off to go live, measurement of the decrease in operating cost, the number of hours saved in process
improvements and the decrease in the number of projects over budget, reduction in staff, and the reduction in overtime.
Two of the acceptable formulas to measure ROI is the benefits/cost ratio (BCR) or the ROI calculation, expressed as a
percent. The benefit cost ratio formula is the total benefits minus program costs. ROI calculation expressed as a
percent is the total benefits – program costs divided by program costs. An illustration of the BCR and ROI formulas can be
founded in Appendix A.
The soft benefits of establishing a PMO are very important to the success of a PMO and should not be underestimated.
Those benefits can include: well trained staffed, increased communication within the organization, alignment of
objectives, reduction in paperwork, increased visibility and focus on results, increased customer relations, lower turn
over, and implementation of best practices to name a few.
Creation of a Value Standards measurement system will allow your PMO to create a proactive focus to capturing and
quantifying PMO Benefits. The creation of such a system will require the organization to establish a set of high level
standards which includes potential benefits. By example one high level standard could be Faster Project Delivery which
could include benefits such as accelerated project completion times and improved cycle time. As the benefits materialize
the PMO will have a real time tool to capture those benefits and share with senior management staff.
The overarching goal of linking your PMO value in your organization is a three step process: 1) map stakeholders to
business objectives, 2) map PMO objectives to deliverables, and 3) produce metrics. The value in measuring your PMO and
making the connection to success is instrumental. PMO Value and ROI can be achieved by sound measurement processes that
can be linked and focused on business objectives.
If you would like to explore the PMO value in your organization, we can help. Please contact us at our corporate
offices at 610-444-1233, check our website for additional white papers at
www.getvitalized.com or e-mail me at
vcs@getvitalized.com.
Appendix A
Example1: two day seminar on best practices in project management:
| Registration Fee | $475 |
| Release time (16 hours at $100/hour) | $1,500 |
| Travel Expenses | $800 |
| $2,875 Training Investment |
During the seminar you discover that many companies have adopted the concept of paperless project management by
implementing a “traffic light” status reporting system. Your company already has a web-based EPM system but you have been
preparing paper reports for status review meetings. Now, every status review meeting will be conducted without paper and
with an LCD projector displaying the web based methodology with a traffic light display beside each work package in the
work breakdown structure. The cost of developing the traffic light system is:
| Systems programming (240 hours at $100/hr) | $24,000 |
| Project management (150 hours a $100/hr) | $15,000 |
| $39,000 |
Benefits expressed by monetary terms are:
- Executive time in project review meetings (20 hours per project to 10 hours per project x
15 hours x 5 executives per meeting x $250/hr): $187,500
- Paperwork preparation time reduction (60hours/project x 15 projects x $100/hr): $90,000
- Total additional benefit is therefore: $275,000
BCR= $275,000-$39,000 / $2,875 = 82
ROI= $275,000-$39,000-$2,875 / $2,875 = $8,109
This example means that for every dollar invested in the training program, there was a return of $8,109 net benefits!