As part of Annett’s master’s thesis for the completion of her studies in “Business Consulting”, she empirically determinded the relation between Organizational paradigms and PMO structures. Her results prove which PMO model/function and activities fits to which organization form and which improvements of a PMO in Portfolio, Program and Project Management are necessary in the future to ensure the added value for an organization and its teams. The research includes management tasks, PMO tasks and tasks done by self-organized team aligned to PMI knowledge areas.

1      Introduction

The subject of this work is the evaluation of success factors associated with building effective office management structures which are aligned with portfolio, program and project management methods. The framework conditions are examined in a literature analysis of standard frameworks in this field and the organizational mindset that is involved. The first chapter provides a brief overview of the research context and presents the research objectives and research hypothesis. The structure of the work and the chapter contents are then outlined and conventions for the subsequent chapters are discussed.

1.1      Motivation

Companies are increasingly enhancing their value creation through the use of project work. While companies may be designed for a long term product life cycle and have associated processes which are controlled by fixed key performance indicator systems, projects have a temporary nature and are characterized by unique goals and various metric systems for the achievement of objectives.

Project economy in value-added processes is increasing, reflecting the increase of membership in professional project related networks or interest in general management magazines.[1] Customers expect short term development and fast production times for rapid time-to-market entry, low costs and high product delivery, with at the same time a quality product. This requires precise control of deadlines, quality and costs, which are difficult to achieve for the product itself during the project, development or manufacturing time. Effective development of framework conditions, processes and metrics for the efficient execution strategy of projects and programs is therefore necessary.

On the one hand, this control can be performed once the project is completed in order to enable added value contribution, or with an increasing number of projects it can be developed and transferred to a cross-company structure based on the strategic goals that affect portfolios, programs and projects. Program and portfolio management (PPM) means taking correct action and being effective in achieving company goals. On the other hand, project management focuses on taking correct action and the efficient handling of the work packages.

Being efficient in project management is not necessarily the same as being effective in project management. When there are an increased number of projects within an organization, the focus changes from efficiently completing a project to being effective in project management as well. To align these functions, project management offices (PMO) are established to ensure effectiveness and efficiency. A PMO refers to a function or a functional unit that is engaged in project, program and portfolio management for a company. For example, a PMO can standardize governance processes between these units and endeavors to ensure that the benefits are driven according to the desired values of the company. Therefore, resources are shared, or methods, tools and techniques are made available and integrated.

1.2      Problems and objectives

The known approaches of classical management strategies have changed due to digitalization or product innovations; projects are planned and managed with agile approaches and handled by people for people with a high focus on corporate culture and identity. In addition, a desire for evolutionary organizational forms with new ways of thinking and values is being created. Departments transform into tribes and squads, from which self-directed teams with the ability of high performance and innovative power are formed for project execution. The demand for lean processes (lean management) is increasing.

If classical approaches are compared with post modern approaches, inconsistencies in the purpose of the tasks are identified. For example, PPM medium- to long-term resource management for effectiveness of company-wide project management alignment is contrary to agile planning methodologies with a short-term character, where the roles and tasks of employees change significantly. A short-term planning horizon for resources affects holistic scheduling, quality and the costs. It can therefore be assumed that further project, program or portfolio management tasks are also affected by other incongruencies.

Taking in to account these dependencies and knowing that the value creation process is coordinated between a variety of life cycles with different roles and tasks, a change of the PMO in the environment of an enterprise is postulated. These changes in PMO functions are analyzed within this thesis. The first step is a literature analysis to identify different PMO models and organizational frameworks. In the second step an empirical research combining the PMO models and organizational frameworks analyses the current value of a PMO unit and how it should be designed in the future.

1.3      Basic scientific attitude and approach

The thesis is based on the principles of constructivism. It is assumed that the findings and knowledge derived from it are not absolutely connected with reality, but are a reflection of the viewer’s experiences of a system.[2] This system is subject to the relations within an organization between the smallest possible units, the elements, which in the holistic view are ordered and formed by interactions of this relationship.[3] In contrast to constructivism, real science pursues the goal of describing, explaining and shaping knowledge according to the principles of physically and empirically perceptible sections of reality.[4] In this work, a constructed system as a research object is linked with findings based on real science, where the ideation of formal science with argumentation for consistency is used. The thesis contains a literature analysis followed by a reflection on the PMO and its relationship to the organization. The logic of the survey and hypotheses is evaluated, followed by a conclusion as well as an outlook for future work in the area of PMO.

2      Organization

In chapter 2, organizational forms are described as a socio-technical system. The dimensions of strategy, processes, people and culture with regard to systemic thinking are considered, and hypotheses are developed. In addition, the difference between effectiveness and efficiency in relation to the creation of an organizational structure is defined, which provides the basis for the thesis.

2.1      Definition of organization and sociotechnical system

The theory of sociotechnical systems implies that each organization is considered as a system containing a subsidiary system. These systems aim to optimize the relation of subsystems with deliminated environmental factors by connecting these elements, instead of isolating subsystems and these factors from each other.[5] The evaluation of dependencies and development between different organizations is analyzed using a systemic triangle based on the sociotechnical approach. It is postulated that self-management is a result of organizational learning and improvement of processes and behavior, which is therefore dependent on several environmental factors and can be measured by the maturity level of an organization as described in chapter 2.3.

A socio-technical system is purposeful, open and dynamic, and contains relationships to the materialistic, social and cultural behavior.[6] In the following chapter the dimensions of strategy, processes, people and culture are defined by systematic analysis of the organizational forms. For analysis the triangular method is used to reflect the relationship between strategy and structure, strategy and people, and structure and people.

Figure 1 – Socio-technical system as subsystem of an organization (own presentation)[7]

Organizations define either a specified division of work in order to be cost-effective in tasks, or a coordination between defined structures enabling effectiveness in processes.[8] Coordination requires specialization of work, depending on whether this applies to a function, object or location. The assumption is that it is more cost effective to transfer an object through a specific function than it is do the opposite. The definition of a PMO used in chapter 3.3 refers to an organizational perspective as a function. In other relationships, the object will be either a portfolio, program or project, as defined in chapters 3.1, 3.2, and 3.3. In order to be cost-effective, the specific portfolio, program or project is therefore advanced through the specialized function of a PMO.

In this context, the function is related to one or multiple roles for the execution of specific activities on the object. Therefore, the success factor in the cost-effectiveness of an organization is essentially a role or multiple roles assigned to a related function working on an object in order to ensure efficiency in processes to advance an object. In the meaning of a PMO, a role or multiple roles related to coordinating portfolio, program or project activities are success factors for cost effectiveness while ensuring that processes are efficient.

Dependencies can be identified when considering the relationship between an organization, a function, an object and a role. As a leading element, context driven organizational behavior influences the behavior of the function (i.e. project management office) with a focus on the object and therefore on the target. This leads to the assumption that the behavior of roles and furthermore the behavior of people can be affected by an object, a function and therefore by the organizational target. A reverse view of this relation is that the behavior of people influences the definition of a role and therefore of the function which leads an object on behalf of an organization. If the function also changes the definition or behavior, this has an impact on either the cost-effectiveness or coordination of processes on behalf of the organizational mindset.

Hypothesis 1

If the organizational strategy changes, the related function changes and therefore the related coordination of an object changes.

2.2      Forms of organization

Based on research findings by Frederik Laloux about organizational structure, practice and behavior in self-managed organizations, four of six organization forms are identified as being economically relevant.[9] These differences in practices and behavior of organizational forms are related to the systemic contexts and development, and are considered to represent maturity in strategy, processes, people and culture. An organization is defined as a system which exists in relation to subsystems (i.e. the function of PMO), and to elements (i.e. object portfolio, program project) and their underlying relationships to roles, which will be defined in chapter 3.

Figure 2 – Organizational forms according to Frederik Laloux (own presentation)[10]

Depending on the strategic perspective, an organizational mindset develops from being Conformist to Achiever to Pluralistic to Evolutionary through the evolution of the target of the organization. The Conformist approach follows a traditional short to medium term planning horizon, with a focus on defined processes and with functions and roles defined by management. The leadership is patriarchal and top-down, with aligned responsibility for the organizational need and defined advantages for middle management. Change is not desired and the mindset is “all is good as it is”.

While the modern Achiever is more strategy oriented, budget, performance and other performance indicators are implemented. Process orientation is enriched by the use of a project orientation approach, functional units, experts, virtual working teams and coaches. Resource management is a central activity, with a focus on assessment centers, talent management, leadership training and incentive management through objectives. The general mindset is performance oriented, with the use of competition to achieve strategic goals.

The Pluralistic mindset is postmodern, with an agile driven mindset, as well as cooperation, fairness and a servant leadership. Delivery management and stakeholder engagement are integrated in a generic process-orientated approach, with empowered roles and responsibilities in activities.

An Evolutionary integral approach is based on full self-management with high flexibility in achieving self-defined goals. This mindset is positive and takes advantage of unforeseen situations by including the intuitive feelings of the employees. Wholeness in self-development is created within a fully empowered complex network organization, and growth occurs through a decentralized strategy created by interactive people and teams.

After having defined the four organizational forms and the relation to practices as presented in Figure 2, a systemic analysis is designed to evaluate these factors using a survey in order to achieve an understanding of the current influence factors of organizations. These influence factors are related to building an effective PMO structure within an organization.

The eight corporate practices are planning and execution, processes, hierarchy, team structure, leadership and decision making, responsibility, human resource management and thinking of change. The combination of these organizational factors with PMO and their activities is defined in chapter 4.

2.3      Maturity of organization

To support organizational structure, projectized work is able to progress several forms of coordination, cooperation and interaction, which leads to a significant change in the way of working.[11]

As explained in chapter 2.2, the sociotechnical system of an organization with its processes as well as the maturity of the organization results in a self-organization approach. Considering this from the perspective of the Capability Maturity Model Integration (CMMI®)[12], six defined stages of maturity can be aligned with the organizational context. When relating this concept to self-managed teams (e.g. in an evolutionary organization), the perspective strategy and processes as well as the dimension of people do not meet all criteria defined by Laloux. Therefore, in this research the sociocratic maturity is defined as representing wholeness and self-organization on top of the CMMI maturity levels.

Maturity Level 0: Incomplete – Ad hoc and unknown.

Work may or may not be completed.

Maturity Level 1: Initial – unpredictable and reactive.

Work is completed but is often delayed and over budget

Maturity Level 2: Managed – managed on the project level.

Projects are planned, performed, measured, and controlled

Maturity Level 3: Defined – proactive, rather than reactive.

Organization-wide standards provide guidance across projects, programs, and portfolios

Maturity Level 4: Quantitative – managed, measured and controlled.

Organization is data-driven with quantitative performance improvement objectives that are predictable and align to meet the needs of internal and external stakeholders

Maturity Level 5: Optimizing – stable and flexible.

Organization is focused on continuous improvement and is built to revolve around and respond to opportunity and change. The organization’s stability provides a platform for agility and innovation

Maturity self-organized: Sociocratic – self-organized or similar.

Organization is focused on social and effective collaboration, transparent rules, role based teams or participants (e.g. forms such as holacracy, sociocracy, social business)

The two entry levels coexist with ad hoc interaction and an unknown completion of work. Initially the work is completed in a reactive mode, running over budget or schedule. These work forms rely on the practices of traditional organizations. A modern performance-oriented organization is defined as being process and project oriented, which is aligned to maturity level 2 with regard to managing projects, and further defined and proactively executed on level 3 with guidance on project, program, and portfolio framework. On level 4, the key performance indicators are success factors to measure and control quantitative performance and involve stakeholders, as is characteristic for an Achiever organization. In the transition from modern to postmodern modes, continuous improvement reaches level 5. Modern organizations are stable but not flexible, while a postmodern environment is less stable but flexible, following an agile approach with self-organized project teams. Both are innovative and open for change.

Optimization is a basis for self-organization, but in the meaning of CMMI this is measured and controlled. An additional level is therefore required in order to quantify this maturity level, which is related to the evolutionary organizational form with full empowerment, a non-hierarchical structure and a decentralized distributed complex network system with a wholeness approach, as described in chapter 2.2. Processes and measures should therefore be focused on social and effective collaboration, transparent rules, and a role-based team constellation or participants (e.g. forms such as holacracy, sociocracy, social business).

Figure 3 – Maturity of organization related to organizational structure

[1] This reflects an increase in professional project management related networks such as PMI® or GPM as well as professional conversations in project related work.

[2] Cf. Feess, Eberhard; Thommen, Jean-Paul (2018): Konstruktivismus. Hg. v. Gabler Wirtschaftslexikon.

[3] Cf. Feess, Eberhard; Gillenkirch, Robert (2018): System. Hg. v. Gabler Wirtschaftslexikon.

[4] Cf. Ulrich, Peter; Hill, Wilhelm (1976): Wissenschaftstheoretische Grundlagen der Betriebswirtschaftslehre (Teil 1), p: 305, in: WiSt (eft 7, pp. 304-309.

[5] Q. v. Maucher, Irene; Paul, Hansjürgen; Rudlof, Christiane (2002): Bericht EMISA-AG: Modellierung in Soziotechnischen Systemen von Informationssystemen. In: Jörg Desel und Mathias Weske (Hg.): Prozessorientierte Methoden und Werkzeuge für die Entwicklung von Informationssystemen. Potsdam (LNI, 21), p. 128–137

[6] Q.v. Vahs, Dietmar (2015): Organisation. Ein Lehr- und Managementbuch. 9., überarb. und erw. Aufl. Stuttgart: Schäffer-Poeschel, p. 37-39.

[7] Q.v. Plischke, Michael (2017): Die Organisation verändern – Muster aufbrechen. In: Guido Baltes und Anta Freyth (Hg.): Veränderungsintelligenz. Agiler, innovativer, unternehmerischer den Wandel unserer Zeit meistern. Wiesbaden: Springer Gabler, S. 193–218.

[8] Q.v. Schewe, Gerhard (2018): Organisation. Hg. v. Gabler Wirtschaftslexikon.

[9] Q.v. Laloux, Frederic (2014): Reinventing organizations. A guide to creating organizations inspired by the next stage of human consciousness. First edition (revised). Brussels: Nelson Parker.

[10] See also the complete analysis: Fehler! Verweisquelle konnte nicht gefunden werden. in Figure 8and Figure 9.

[11] Q. v. Rollwagen, Ingo (2010): Projektwirtschaft und Management neuer Geschäftskulturen. In: Rüdiger L. Thomas, Lutz Becker und Bop Sandrino-Arndt (Hg.): Handbuch Project-Management Office. Mit PMO zum strategischen Management der Projektlandschaft. Düsseldorf: Symposion Publishing, pp. 23–53.

[12] C.v. Prechelt, Lutz (2017): Process Improvement: CMMI. Freie Universität Berlin, Institut für Informatik. Berlin, 12.2017.