Organizational Change, Business Agility and the Role of the PMO
The change that businesses face and the need to act are no longer viewed as periodic episodes that are undertaken from time to time in otherwise stable working environments. Organizational change and business agility have now become the new norm. This did not happen overnight, nor should it be a surprise.
As chronicled by Prosci, a global leader in change management, four distinct eras mark the evolution and growth of the change management discipline2. The first era was the pre-1990s when academics established its foundations. The second era was the 1990s when change management became part of the business vernacular. The third era was in the 2000s when it was formalized as a discipline and driven by processes, tools and organizational functions. And the fourth era is the present era and future direction in which the change management discipline has and is expected to see increased professional development and organizational maturity.
Not surprisingly, a similar set of eras have marked the evolution and growth of business agility. In the pre-1990s era, an interest in alternatives to plan-driven, big design up front, software development approaches culminated. In the 1990s era, rapid application development became the mainstay of interest and working vernacular of software development organizations. In the 2000s era, the Agile Manifesto generated a movement that formalized as a discipline in software development and then began to spread throughout the business to other functional areas and disciplines. And in the fourth era, the present era and future direction, the view of agility has fully broadened into business agility and, like change management, is expected to see increased professional development and organizational maturity.
How does organizational change and business agility impact the role of PMO…
With increased leadership team interest and investments, how does organizational change and business agility impact the role of the PMO? Should PMOs subsume these initiatives and undergo a location and name change? Many organizational change experts advocate against this preferring instead a dedicated office to drive change initiatives3. Similarly, PPM and PMO management experts advocate that PMOs should not be the owners of organizational change, but part of the process4. And Agile experts offer mixed opinions with most advocating a role for an Agile PMO5 though some suggest that Agile practices and effective collaboration eliminate the need for a PMO6. These expert perspectives on the role of the PMO have merit and are well addressed in the industry. Not well addressed, is a different and more basic PMO role, but it requires a small change in PMO thinking to see.
A Small Change in PMO Thinking
Not all, but far too many PMO practitioners think about projects in a very myopic way. Their idea of a project is limited to what is found in a PMO and managed by a certified project management professional.
This is understandable as standards organizations such as the Project Management Institute (PMI) and the U.K. Office of Government Commerce (OGC) have produced organizational governance models that depict portfolio management (PMOs) as changing the business and business as usual (operations) as running the business. As shown in Figure 1, the graphical images representing these governance models such as this one representing the OGC P3O Methodology7 can lead to an incorrect view and thinking about projects.
Figure 1: Change the Business, Run the Business
As a result, PMO practitioners unwittingly limit their view of projects, thinking of them only as the formal initiatives that change the business and that take place only in formal project organizations such as PMOs, New Product Development (NPD), Change Management Offices (CMOs), and Business Transformation Offices (BTOs). Ergo, the rest of the company runs the business performing non-unique, recurring work activities as if on auto-pilot; no projects or project managers there. Consider the ramifications of this thinking:
- The effort of an Enterprise PMO to consolidate the financial systems of two merged companies is a project, but the effort of the executive that did the merger is not.
- The effort of New Product Development to bring an enterprise solution to market is a project, but the effort of a salesperson to manage a long, complex sale is not.
- The effort of a Change Management Office to implement a change is a project, but the effort a user group to sustain the change is not.
Whether PMO practitioners are too busy to think about projects outside of their PMO or whether they choose to deny that projects outside of it exist, there’s a better mindset to have. With just a small change in thinking, PMO practitioners can exhibit a more curious mindset about these projects, understand their importance to the leadership team the PMO serves, and reflect upon what actions their leadership team might want or need them to take.
Then, PMO practitioners can make a nudge, a new concept in behavior economics theory made prominent by Cass Sunstein and Richard Thaler, 2018’s Nobel Prize Winner, and an emerging role and new opportunity for PMOs in support of organizational change and business agility.
Nudging Organizational Change and Business Agility
Generally speaking, there are two domains of organizational change and business agility projects; formal and informal. The formal domain of these projects consists of the highly important projects that are undertaken by PMOs, CMOs, and BTOs as a result of strategic planning. The informal domain of these projects consists of spontaneous supporting projects that are undertaken at lower levels in the organization in response to the change. A new change is planned, implementation begins, and one of three outcomes is achieved; success, partial success, or failure. For many organizations, while it is the formal projects that make the initial change, it is the informal projects that play a key role in sustaining that change.
Naturally, PMOs must first address the formal domain of organizational change and business agility projects with careful adoption of industry standards, principles, and practices. But that’s not all they can do; they can next consider how best to address the informal domain of projects. Toward that aim, the PMO does not seek to own these informal projects or compel how they are to be managed. Rather, the PMO nudges.
The behavioral economics theory of nudging posits that a responsible nudge influences a desired choice while not taking away the choice architecture, the power to choose. For example, putting healthy food choices at eye level is a nudge. Banning junk food isn’t.
Change management gurus at McKinsey & Company, Guntner and Sperling, explain in their article, “How to nudge your way to better performance8,” how nudges were used at Virgin Atlantic as part of an initiative to reduce fuel costs. Over 300 flight captains were separated into four groups; a control group was told that fuel usage would be monitored; a second group was also given monthly reports; a third group was given reports, targets to achieve, and then praise or encouragement afterwards; a fourth group was given all that and the incentive that if they hit their targets, donations to charities would be made. The result, all nudged groups saved more than the control group and Virgin Atlantic saved over 5 million dollars in fuel costs with virtually no cost to the airline.
So in a PMO context, how does nudging an informal project that supports organizational change and business agility work? With no authority and visibility into these projects, who is nudged? What is the nudge? When is the nudge given? And what happens after the nudge?
Starting with a small change in PMO practitioner thinking, the following three steps address these questions and provide an approach that PMO managers in organizations of all shapes and sizes can take to make highly effective nudges.
- Step 1: Adopt an Organizational-wide Project Management mindset
- Step 2: Recognize the opportunities for PMO nudges
- Step 3: Make a PMO nudge and leave it at that
Step 1: Adopt an Organizational-wide Project Management mindset
Adopt an organizational-wide project management mindset by recognizing the domains of formal and informal projects by having a more nuanced view of projects. As shown in Figure 2, organizational-wide project management is comprised of four fitness landscapes that provide a tapestry from which projects and project techniques can be positioned and better understood8.
Figure 2: Organizational-wide Project Management
The “change the business, run the business” mindset in which projects are what changes the business and business as usual (BAU) operations is what runs the business is replaced with a broader mindset in which projects ubiquitously exist throughout the organization in both “change the business” and “run the business” organizations. This is reflected by the horizontal axis of the organizational-wide project management grid which depicts the type of project, formal or informal, and the vertical axis which depicts the type of project approach, scientific management driven or aligned to the principles of complex adaptive systems. The resulting four fitness landscapes can be defined and described as follows:
- Invisible landscapes. These landscapes are not visible to most PMO people because informal, run the business projects are not viewed as projects. With no guidance from a PMO, these projects are managed as task lists. Though lightweight project management approaches would be of value, few in these landscapes know or use them.
- Simple landscapes. These landscapes are represented by traditional PMOs. Scientific management in the form of standards, processes, and control measurements are applied to the management of formal projects. Alternative, adaptive approaches are resisted, often viewed as not suitable for the project mix or scalable to the organization.
- Rugged landscapes. These landscapes are represented by adaptive organizations that embrace agility. The formal projects of the organization are no longer managed with scientific plan-driven techniques, but in accordance with the principles of complex adaptive systems from which Agile, adaptive, and hybrid practices have emerged.
- Dancing landscapes. These landscapes are represented by organizations that have highly emergent interactions and hard to define boundaries. The informal projects that exist in this landscape are not viewed as projects. Though undertaken in an Agile-like manner, few in these landscapes have had training or coaching in Agile.
Step 2: Recognize the opportunities for PMO nudges
With a broader mindset and more nuance view of projects, the opportunities and ways in which the PMO can nudge organizational change and business agility can be recognized. For many organizations, the informal projects that support a formal organizational change initiative are a good place to start. These informal projects are valuable and important in their own right, yet overlooked by most PMOs, CMOs, BTOs, and formal project performing organizations.
Consider the example of a nudge made by a PMO manager in a US-based midsize corporation undergoing a workforce reduction. The Change Management Office (CMO) was leading the initiative with Finance and HR heavily involved. The formal projects of the program were well-planned and executed. Program instructions to the field offices were prepared, employee packages including separation pay, transitional benefits, and job placement counseling were put in place and funded, and business support groups were being consolidated.
Each of the six region managers was given a workforce reduction target of 10% and a 90 day timeframe to decide which employees would be dismissed and to formally release those employees with signed separation agreements. How the region managers went about meeting the deadline was up to them. Though the deadline was a milestone in the CMO’s formal plan, there were no task details to explain how it was to be done.
After a meeting with the PMO manager on an unrelated matter, one of the region managers expressed concern over the workforce reduction telling the PMO manager that the region managers had talked with each other about the workforce reduction, had concerns over the lack of a consistent approach for the effort, and wished they had more time. The region manager was friends with the PMO manager and was merely venting, not asking for help.
Later that day, the PMO manager was in a meeting also attended by the CMO manager and the division head to whom the region managers reported. At the close of the meeting, the PMO manager picked a moment and made a nudge. He updated CMO manager and the division head on his conversation with the region manager and offered to help.
Though they all had the view that deciding which employees to separate was “running the business” decision-making and not a formal project in the sense of needing to be added to and managed within the change program, they recognized the problem. The PMO manager offered to conference with the region managers, suggest they view their 90 day task as a mini-project, and establish an approach that they could all use to do a good job and meet the deadline. The division head was not only appreciative but arranged and participated in the calls with the PMO manager which led to six informal projects and six successful outcomes that contributed to the overall success of the company-wide workforce reduction.
Should the formal change plan have been more detailed? Should the region managers have been able to manage this on their own? Perhaps, but a better question would be, had the PMO manager not made the nudge what would have been the organizational change outcome?
Another example of a PMO manager nudge was an organizational change initiative to transform a regional airline. Digital technology was integrated into all areas of the business replacing paper-based work processes with tablet computers. Implementing the change went well, but sustaining the change was proving difficult. Many department heads were faced with managing ad hoc projects to develop training for the new processes. As part of the organizational change program, they had the responsibility for this and were willing to do it, just not able.
The informal projects of the department heads to develop training lingered on and schedules for training classes were put on hold which became a discussion topic at the next Change Management Office meeting. A small epiphany was taking place; informal projects are important to organizational change, they either sustain it or drain it.
Informal projects are important to organizational change, they either sustain it or drain it…
At that moment in the meeting, the PMO manager decided to make a nudge. She suggested that as part of normal PMO work and support to the CMO, the PMO staff would put together a lunch-and-learn training program for project management approaches and Agile techniques suitable for use by department managers in support of their organizational change program duties. They could also use them in their business as usual, ad hoc projects. Though the effort of the PMO staff was quite small, the value to the change initiative turned out to be significant.
Another way to recognize an opportunity for PMO nudge is to consider the ramifications when it is not given. A tragic example of this was a publicly traded software firm with revenues of $80 million, a stock price at $83 per share, and a market value of $3.1 billion. At the end of the 2nd quarter of the then report period, one of the salespersons failed to make a $2 million sale and the VP of sales failed to manage the pipeline of sales projects in a way that would ensure the achievement of the company’s quarterly revenue and earnings forecast.
The importance of a publicly traded company achieving the expectations of its investors and the financial community could not have been more on display. After the quarterly release, showing a significant miss in revenue and earnings, the company’s stock price fell from $83 to $42 per share. Over $1.5 billion in market value was lost.
The company had formal project organizations; a PMO with PMBOK-aligned processes and certified project managers and a NPD organization with Stage-Gate processes and trained product managers. The sales organization, however, had no project management practices or salespeople trained in the discipline. Sales projects were managed by way of Friday conference calls and a sales forecast spreadsheet. As a result, salespeople were making revenue forecasts in absence of credible project plans for their sales and the VP of sales was committing revenue forecasts to the CFO without risk planning, revenue buffering, and contingencies to ensure the forecasts would be made.
In hindsight, it should have been obvious to all that this publicly traded software company was at risk. It was to the financial community as the stock price continued to fall as did the confidence in the company. By the end of the year, the value of the firm was less than $500 million and a few years later it was acquired by a private equity firm for $124 million, roughly 4% of its once value. Think of what might have been if the PMO manager had nudged the VP of sales to improve how the salespeople managed their projects and how the VP of sales managed the portfolio of projects. Perhaps there would not have been a missed forecast.
The behaviors and skillsets that are taken for granted in PMOs and formal project performing organizations are often absent in other parts of the organization. Yet, these parts of the organization have projects; informal projects in support of sustaining organizational change and departmental projects in support of running the business, not to mention reacting to it. With a broader and more nuanced view of projects, PMO managers can easily recognize the potential benefits of making a nudge as well as the potential risks of not.
Step 3: Make a PMO nudge at leave it at that
In making a PMO nudge it is important to remember that a nudge is just a nudge; it is not a command or a passive-aggressive compulsion. Nudges have three defining characteristics:
- Nudges don’t affect economic incentives. There is no payment for accepting the nudge or penalty for ignoring it.
- Nudges are people-centered. They aim to make people’s lives better.
- Nudges are voluntary. They do not restrict or remove freedom of choice.
Many organizations are adopting nudging. Carsten Tams, change management and cultural transformation expert, advises that to create an adaptive organization you must comb through your practices, root out those that stifle change, and implant nudges that support change-promoting behavior9. In addition to individual efforts, organizations can go on nudge hunts or set up nudge units. For most PMO practitioners, however, a good way to begin is to start making nudges and leave it at that. It’s okay for a PMO nudge to be ignored, but it’s more likely that it won’t.
For most PMOs and formal project performing organizations, there is no shortage of work to do. Many believe that PMOs could cut their project portfolio in half and still be undertaking more projects than can be successfully delivered. So with all that PMOs have before them, is nudging organizational change and business agility something they should consider?
For most PMOs, the answer is yes. For one, PMOs are uniquely ready. That is, in a situational leadership context, PMOs have a willingness and ability that few other organizations in the enterprise possess. For another, who would be better suited to give nudges? If not the PMO, who has a better day-to-day view of the strategy of the organization, its organizational change and business agility initiatives, the organizational-wide project management fitness landscapes in play, the plan-driven and Agile project approaches best suited to those landscapes, and the benefits and risks of it all? And for a last reason, with a Nobel Prize winner and organizations experiencing success, it is likely that the behavior science theory known as Nudging will continue to be advocated for organizations to adopt wherever they can.
The ongoing debate over the future role of the PMO will continue to be interesting and provide mixed arguments. There will be those that strongly believe in the PMO and will advocate for its placement high in the organization and for its leader to have a moniker that starts with C. There will be those that believe just as strongly that with increasingly effective Agile practices and collaboration, PMOs are no longer needed. Most of us are somewhere in the middle trusting that if PMOs are driven by business needs, they will come out just fine.
As an emerging role and new opportunity for the Business Driven PMO to consider, Nudging organizational change and business agility is well worth considering.
1 This whitepaper is based on books and articles by the author. See:
- Mark P. Perry, Business Driven PMO Setup – Practical Insights, Techniques and Case Examples for Ensuring Success (Plantation, Florida: J. Ross Publishing, 2009)
- Mark P. Perry, Business Driven Project Portfolio Management – Conquering the Top 10 Risks that Threaten Success (Plantation, Florida: J. Ross Publishing, 2011)
- Mark P. Perry, Business Driven PMO Success Stories – Across Industries and Around the World (Plantation, Florida: J. Ross Publishing, 2013)
- Mark P. Perry, Organizational Project Management, (September 6, 2017)
2 The History and Future of Change Management. Prosci, 2018
3 Rafael Lemaitre, Roberto Wyszkowsky and James Creelman, The Transformation Office: A New Organizational Capability for the Digital Economy. ShiftIN Partners, 2019
4 Andy Jordan, Organizational Change Management and the PMO. ProjectMangement.com, 2018
5 Ian Mitchell, The Agile PMO. Scrum.org, 2017
6 Jonathan Feldman, Project Management Offices: A Waste Of Money? InformationWeek, 2012
7 P3O Methodology. The Knowledge Academy, 2019
8 Anna Guntner, Julia Sperling, How to nudge your way to better performance. McKinsey & Company, 2019
9 Carsten Tams, Small Is Beautiful: Using Gentle Nudges To Change Organizations. Forbes 2018