Key Developments In The PMO

Key Developments in the PMO Challenge III: Building High-Performance Project Managers As the economic environment has become more volatile, the project environment has evolved to include more cross-functional, customer-facing initiatives. Successful project delivery has become more critical to business success than ever before, necessitating the development of high-performing project managers. A Volatile Portfolio Increased uncertainty about the economy’s direction leads companies to hedge their funding decisions Blue Chip Indicators Growth Forecasts Top Enterprise Priorities for 2007 2007 U.S. GDP Forecast, January–August 2007 Corporate Executive Board Analysis Downward Revision 3.4% 1. Building mechanisms to mitigate risk of economic downturn Jan. ’07 2.5% 2. Innovating business models to serve multiple customer markets U.S. GDP Growth 3. Resolving execution challenges in China 2.0% 2006 (Actual) 4. Increasing vigilance in executive compensation disclosures Aug. ’07 5. Examining the efficacy of IT investments 2007 (Forecast) which, coupled with growing project complexity and criticality exacerbates uncertainty and pressure on the PMO Evolution of Typical Projects PMOEC Analysis Not Getting Any Easier 2002 2007 Single silo Back-office processes Medium-sized projects with minimal dependencies Cross-silo Front-and back-office process integration Larger projects with complex dependencies “It’s not just that business is getting more complex, but that the next layer of opportunities for IT happen to be in a more complex part of business. It has become more complex to define processes, drive consensus, develop solutions, and communicate across silos.” Chief Information Officer Retail Corporation Source: “Blue Chip Economic Indicators,” Reuters, 2007; Corporate Executive Board’s State of the Enterprise: The 2007 Agenda; CIO Executive Board research; PMO Executive Council research. PMOEC191GIAH 2007 Corporate Executive Board. All Rights Reserved. 4

Key Developments in the PMO Profiled below are leading practices the PMO Executive Council has identified over the course of 2007 that best define the evolution of a progressive PMO organization. Key Challenges for the PMO Organization in 2007 I. Disciplining Project Delivery II. Leveraging Project Portfolio Management Tools III. Building High-Performance Project Managers Highlighted Practice Highlighted Practice Highlighted Practice * Close-Ended Complexity Assessment Alpha Company determines the appropriate methodological rigor by using an up-front complexity filter. * Lightweight Portfolio Visibility Epsilon Company streamlines data input requirements to increase returns on metrics gathering activities. Case Examples * * MethodologyTailoring Directives Case Examples * Kappa Corporation uses real-life case studies to screen project manager candidates. Case Examples * Theta* * Pseudonym. 5 * Competency-Based Case Interviews Tool-Informed Demand Management Project Manager Time Reallocation PMOEC191GIAH 2007 Corporate Executive Board. All Rights Reserved. Kappa Corporation Success-Aligned Incentives Informed Stakeholder Communication Management

Key Developments in the PMO Assessing Project Risk Alpha Company* conducts an up-front complexity assessment of all projects, in addition to the standard size assessment, allowing it to drive greater visibility into possible project delivery risks and assign a project methodology suitable to the needs of the project. Look Beyond Project Size Alpha Company accurately measures project delivery risk through close-ended questions and clear criteria Project Size Criteria Project Complexity Small Medium Large Criteria 24 24–170 170 500 500– 1,000 1,000 1. Requirements Complexity 3. Elapsed Project Duration (Months) 4 5–12 12 4. Project Team Size 4 5–15 15 1. Work Months 2. Budget Low Intermediate High Straightforward and well understood by project team Complex and well understood by project team Complex and not well articulated 2. Number of Projects Impacted 0 1 2 3. Interfaces to Existing Systems 0 1–3 3 or external 4. Internal and External Groups to Coordinate 1 2–4 4 N/A or batch processing only Simple online query and update Complex processing— Internet and distributed systems N/A or 50 entities 50–100 entities 100 entities 7. Online Response Time 7 seconds 3–7 seconds 2 seconds 8. System Availability N/A or 95% 98% 99% 9. Number of Daily Transactions 1,000 1,000–50,000 50,000 30 days outage tolerable 1 week outage tolerable 1 day outage tolerable N/A, good quality, simple to convert or automatable Fair complexity, average complexity, average to convert Poor quality, very complex, difficult to convert 5. Processing Type Complexity Matters 6. Data Complexity “If projects are categorized only by size, you overlook the risk of smaller, more complex projects that can have an impact on multiple systems or multiple business units.” Senior Manager, IT Best Practices Alpha Company 10. Business Criticality 11. Data Quality and Conversion * Pseudonym. PMOEC191GIAH 2007 Corporate Executive Board. All Rights Reserved. Source: Alpha Company; PMO Executive Council research. 6

Key Developments in the PMO Rightsizing Methodological Rigor During the project scoping phase, Beta Company* uses a simple, six-question suitability filter to determine whether a project should follow the light or full methodology. A workshop is then held to specifically tailor the project delivery methodology. Seeking Clearance for Takeoff A suitability filter helps project managers choose a methodology track and appropriate deliverables are selected in a focused meeting Light Methodology Suitability Filter Methodology Rightsizing Workshop Statement The project does not require a feasibility study (e.g., it is a tried and tested solution). Yes Participants No All responses must be “Yes” to approve use of light methodology. The project is using existing technology, environments, and systems. The project will only make changes to an existing application and will not make fundamental changes to the system. The project will be delivered in a single implementation. Design Authority Representative Program Manager Project Manager Architect The project does not involve implementing a new third-party package solution. Finance Manager The project is being delivered solely for Beta Company’s use and benefit. Business Analyst with project managers obtaining sign-off to exclude waiverable deliverables to create a formal management plan Terms of Reference A Deliverable Application Owner Service Management Manager Applications Service Manager Gateway Manager Project A Project A Project A Management Plan Program Manager: Accountable Project Manager: A A Operability Checklist Signature: Design Manager Project Authority Project: Web Site Interface Update Project Manager: John Smith Deliverable: System Infrastructure Definition Approver: John Finn Executive Sponsor Deliverable Waiver Completed Date Excluded Deliverable Project Management Deliverables RACI Chart Service-Level Agreement I R R Implementation on Readiness Review I A I User Acceptance Specifications C A A R A * Pseudonym. PMOEC191GIAH 2007 Corporate Executive Board. All Rights Reserved. This document serves as the final methodology roadmap for the project. Reviewer C Contribute Approve I Inform Source: Beta Company; PMO Executive Council research. 7

Key Developments in the PMO Removing Administrative Burden Delta Company* introduces the project planner role to ease the administrative burdens of project managers. Project planners support project managers by taking on activities such as project scheduling and planning, PPM tool updates, ad hoc metrics and reports production, and tagging and formatting resources to ensure up-to-date information. Off-Loading Administrative Activities Delta Company uses a small number of multifunctional project planners to improve consistency across the entire project management community Description of Role Multiplier Effect 1 Illustrative Project Scheduling and Planning Projects Project Managers 2 Project Updates in PPM Tool Project Planner 3 Ad Hoc Metrics Generation 4 Tagging and Formatting of Resources Seven project planners assist 70 project managers in handling 140 projects. leading to a 15% increase in time available for external stakeholder management Project Manager Time Allocation External Responsibilities Stakeholder Management Vendor Management Internal Responsibilities Risk Planning Resource Allocation Communication Planning Issue Management Day-to-Day Management Before Planners External Project Manager Time Allocation Planners provide support with risk planning, resource allocation, and communication planning. After Planners External 30% 45% 56% Internal 51% 14% Internal Administration 4% * Pseudonym. PMOEC191GIAH 2007 Corporate Executive Board. All Rights Reserved. Positive Externalities Data Consistency Common Terminology Immediate Communication Early-Risk Identification Administration 8 Source: Delta Company; PMO Executive Council research.

Key Developments in the PMO Refreshing Metrics Epsilon Company* applies metrics discipline by reevaluating data collection on a quarterly basis. Specifically, they restrict metrics collection to those metrics that are currently used while new metrics are introduced only as needed. Measures That Matter Epsilon Company revisits its metrics on a quarterly basis to ensure ongoing applicability Metrics Decision Rules Do we currently track this metric? Yes No Actionable Does it provide actionable data? Have we utilized this data for specific decisions? Yes Retain Metric Decision Enabling Does the metric translate technical project data into business risk implications that executives can leverage for mitigation trade-off decisions? No Yes Predictive Does the metric provide directional guidance on readiness to meet future threat scenarios? Drop Metric Yes Adopt Metric Consider alternative metrics that provide a contextual framework for metrics to facilitate short- and long-term trend identification. No Discard unless the metric serves a specific and useful purpose. * Pseudonym. PMOEC191GIAH 2007 Corporate Executive Board. All Rights Reserved. Consider replacing metric with one that highlights “early-warning symptoms” along with specific types of risks to forewarn management of potential negative outcomes to be mitigated. No Modular Does the metric have features that can be integrated with other metrics to synthesize overall project, portfolio, and PMO performance? Yes Revisit reasons for considering metric to determine its decision-enabling characteristics. Start by understanding specific needs of different audiences and their information requirements. No Comparable Over Time Does the metric capture historical trends in performance? Yes No Source: Epsilon Company; PMO Executive Council research. 9

Key Developments in the PMO Calculating Capacity By outlining the value of individual projects, Gamma Company* gets a deeper understanding of how to prioritize strategic projects. The activity value matrix presents a uniform method to evaluate projects using a consistent set of criteria. Skill-based resource requirements are incorporated into this procedure to match supply of resources with the portfolio. Window into the Future Gamma Company considers operational realities Activity Value Matrix Investor Map Items Total Prioritization—Estimated Total( ): Activity Level of Effort Activity Benefit 1 Benefit 2 Benefit 3 Benefit 4 Benefit 5 Sum Current Year Potential Future Year Planned Metric Maturity Level Strategy 1 Strategy 3 Strategy 2 Strategy 4 Regulatory Infrastructure Product Capabilities Customer Experience Transformation Strategy 5 Strategy (Circle One) Activity Name: Project Type (Circle One) Business Model/Process Transformation Technology Impact Yes Cumulative 30 Score No Business Capability Value Description The value of each activity is described to driving understanding individual projects and how well they align to strategy. Resourcing is informed using high-level, role-based estimates. -10 No Scoring Data Available Not Recommended Current Year Planned Actual Bucket Color by: Level of Effort Indicator Size by: Prioritization—Estimated Total( ) to determine project candidate selection, prioritization, and initiative spend Portfolio plans are charted for current and future project needs. Multiyear plans alleviate resource issues up front. Decisions Project Selection Portfolio Prioritization Initiative Spend Activity Value Matrix Investor Map What-If Scenario Plans in ProSight Strategic Project Governance Team, Consisting of Senior-Level VPs and Managers * Pseudonym. PMOEC191GIAH 2007 Corporate Executive Board. All Rights Reserved. Source: Gamma Company; PMO Executive Council research. 10

Key Developments in the PMO Interviewing for Key Competencies Kappa Corporation To assess a project manager candidate’s proficiency in critical competencies, Kappa Corporation* incorporates case-based, behavioral interviews into the hiring process. These case interviews are based on real-life projects delivered by their organization and are designed to highlight the most important skills for successful project management at Kappa. Round Peg, Round Hole PMO identifies new-hire competency requirements and develops a corresponding interview guide based on recent project scenarios Critical Competencies Required Partial List Case Interview Guide Evaluation Approach Scenario: Critical resource conflict Problem Solving Business Judgment Ownership and Accountability Influencing Skills Your project is two weeks away from beginning testing. While confirming resource assignments, you discover a conflict. The testing resource assigned to your project is working on a different project that has now made him unavailable for eight weeks. This is the only testing resource in the organization that has the skills required to complete testing for your project. What do you do? Poise with Executive Audience Ability to Inspire Trust Verbal Communication Observe During Interview Questions Scenario criteria include the following: Based on recent, mission-critical project Encompass “tough call” situation Require broad skill-set to manage Case Project: External Web Site Security Authorization Upgrade Competencies Via Case- and Behavior Based Interview Questions Assess 1 to appraise candidates proficiency level and cultural fit for project environment 360-Degree Candidate Interview Candidate Evaluation 2 Each case interview is followed up with a series of behavior-based questions to further assess candidate’s experience and proficiency. Illustrative Fails to Meet 3 Meets Exceeds ? PM Candidate Manager and peerlevel participation generates buy-in for hiring decisions and provides a litmus test of candidate fit to current environment and team dynamics. Partially Meets Problem Solving Business Judgment Ownership and Accountability Influencing Skills Internal Customer Representative Hiring Portfolio Manager EPMO Representative (Peer Level) Poise with Executive Audience Ability to Inspire Trust Verbal Communication * Pseudonym. PMOEC191GIAH 2007 Corporate Executive Board. All Rights Reserved. Source: Kappa Corporation; PMO Executive Council research. 11

Key Developments in the PMO Defining Project Success To reinforce a sense of ownership and commitment to full project outcomes, Sigma Corporation* employs a practice to define “success” for both the project and the individual project manager role. At the beginning of a project at Sigma Corporation, the project manager facilitates an up-front agreement on the definition of success key with project stakeholders, which is backed up by clear, quantifiable, and measurable metrics. Beginning with the End in Mind The business sponsor, project manager, and project stakeholders define success for each project up front setting realistic expectations for project success in the project charter 2 Project Stakeholder Priorities Updating customer operations protocols Establishing monitoring and controls Standardizing infrastructure requirements Adhering to architecture and development standards Priority levels indicate relative importance of success dimensions. 1 Project-specific charter outlines consensus-driven definition of success. Project Success Matrix Illustrative Project Manager Priorities Setting and facilitating realistic success measures Providing a voice of experience Facilitating trade-off negotiations Ensuring alignment to strategic objectives Surfacing program-level interdependencies (with assistance from program managers) Project Sponsor Priorities Driving value realization Improving service-level agreements Ensuring customer satisfaction Boosting revenue Approving final sign-off on success measures Parameter Description Objective Priority Acceptable Variance Schedule Planned versus actual completion date 40 Weeks 2 /– 5% Cost Planned versus actual cost 2.4 Million 3 /– 5% Business Value Incremental annualized revenue 6 months after release 1.5 Million 1 /– 5% Quality Post-release patches 90 days after deployment 2 5 /– 50% Application Response Time Average user response time for North America 2 Milliseconds 4 /– 10% Customer Support Reduction in level 1 technical support calls 10% 6 /– 20% Service-Level Agreements Web site uptime goal 99% 7 /– 30% 3 Clearly defined variances serve as guardrails for in-flight decisions. * Pseudonym. PMOEC191GIAH 2007 Corporate Executive Board. All Rights Reserved. Source: Sigma Corporation; PMO Executive Council research. 12

Key Developments in the PMO Communicating with Project Sponsors Theta To equip project managers with effective tools to better inform their ongoing communication with project stakeholders, the Theta Corporation* PMO leverages analysis and segmentation of stakeholders to drive project manager stakeholder communication strategies. Mapping the Stakeholder Terrain Formal assessment helps project managers prioritize efforts for customized stakeholder management strategy and communication Stakeholder Assessment Illustrative Project: SAP Financials Implementation Name: Francisco Santos 3 Stakeholders are classified into priority segments to tailor communication strategies accordingly. Department: Internet Business Solutions Group Title: Senior Consultant, Operations Supplier Supportive Project Sponsor Developer Neutral Customer Sponsor’s Boss Resistant Financier Auditor Super User Other: Supportive Change Posture Neutral Make or Break Executive Sponsor Segmentation Matrix Influential Deliberate effort to identify point of view facilitates understanding of how project will impact stakeholder. Change Posture Impacted 1 Priority Segmentation Type of Stakeholder Resistant Low Medium High Degree of Influence User 2 Recognizing primary influencers aids development of communication tactics to improve or maintain change post

innovations affecting the PMO function. These updates are tailored to provide quick insight into some of the critical strategic management challenges facing PMO executives today. Our research in 2007 outlined three leading objectives that provide a roadmap for redefi ning the PMO organization's role within the enterprise. Rightsizing Project .