Why PMO Is The Solution Not To Fail?
Why PMO is the Solution Not to Fail
A new approach to project delivery for sustained success in dynamic markets.
PMO: A New Culture for Project Delivery
The Project Management Office (PMO) is more than just a coordinating effort by different departments; it’s a new organizational structure with its own vision, mission, and goals. It represents a new culture designed to overcome common problems like bad project records, unclear priorities, conflicts of authority, excuses, bottlenecks, and centralized decision-making in various organizations.
Trying to build a PMO *within* an existing organization can be difficult and risky. Therefore, creating an independent PMO with full authority and a fresh culture, gradually taking over project delivery from the main organization, is often the fastest and most successful model. This approach was even adopted by the World Bank in developing countries to reduce corruption and effectively manage projects for faster delivery within time and budget.
This concept applies to any work that is a “project” with a defined scope, resources, cost, and time. PMO is not just for organizations that primarily deliver projects, nor is it merely a project management method. It’s a strategic and financial approach to project management, controlling every step from project initiation (pre-contract) to close-out. It creates a dynamic link between all projects, ensuring delivery with maximized productivity and profit, all aligned with strategic goals.
According to most surveys, around 25% of projects are total failures and have to be abandoned, while another 50% are seriously late, significantly over budget, or fail to deliver all required business outcomes (as noted in “Project Program and Portfolio Management” by John Carroll).
Why Contractors Fail: Common Root Causes
As a professional engineer specializing in engineering management, I’ve always focused on linking engineering knowledge with business and finance, which is essential for managing construction companies. This interest became an obsession in 2002 when I read about the bankruptcy of Holzmann, Germany’s second-largest construction company. I wondered why such a big company with advanced systems and professionals could fail?
After that, every year, I read about one or two more large contractors going bankrupt. Of course, thousands of small and medium companies fail too, but let’s focus on the big names. These bankruptcy announcements became more common during recent recessions. In the USA alone, the recession severely impacted many large contractors, who needed government support and incentives (with expenditures reaching over 1,162 billion U.S. dollars) to survive.
According to the Fail Management Institute, the root causes of contractor failure fall into three main categories:
Strategic Failures
- Unrealistic growth, over-expansion, or entering unfamiliar markets/new types of construction.
- Obsession with project volume over quality or profitability.
- Unrealistic promises, bad contracts, or poor project selection.
Organizational Failures
- Insufficient capital or profits.
- Lack of business knowledge, poor financial management, or inadequate sales/marketing skills.
- Poor leadership or ineffective leadership transfer.
- Project losses or poor performance in the field.
- Owner court battles or owner bankruptcy.
Uncontrollable Factors
- Industry or economic weakness.
- Changes in banking or surety requirements.
How PMO Addresses These Challenges
The categories of failure listed above are precisely what a PMO aims to address. A PMO aligns strategic goals within the organization to provide full control over project delivery, adapting to market changes and challenges.
Moreover, the alternative to bankruptcy is often restructuring. We see many organizations attempt to restructure and reposition themselves in different sectors or markets.
I would conclude that for any contractor who restructures their organization without establishing a new culture (like a PMO), they are merely delaying collapse if the market continues to slow down with intense competition and price wars.
The Time to Act is Now: Embrace PMO
Establishing PMOs takes time and can be a difficult process for any established organization. Therefore, don’t delay the decision to build your PMO.
We at ZALBASIREPPM can help you. Search for us on Google to find more information on our website. We make it simple and easy to understand, tailored to your organization’s maturity, to help you make credible decisions.
Best wishes for all,
Ziad Albasir