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Executing Change

Beyond the PMO
June 24, 2010 by Perry Keenan, Rob Sims, Chris Barrett, and Kimberly Powell
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    In This Article
    • In a business environment that demands complex, high-risk change efforts, businesses need a strategic initiative office to focus on organizational alignment and value delivery.

    • An effective SIO shifts the focus from process to value, ensuring that milestones, timelines, and target impact are clearly defined and regularly tracked.

    • In effect, the SIO is an intermediary between the executive leadership team and the business line.

     

    It was late Friday afternoon, and the bank’s CFO faced a daunting task: to evaluate and report on the status of 635 projects that were in varying stages of completion. The list had taken six weeks to compile and ranged from efforts associated with a major profit-improvement program to a huge number of standalone projects from all parts of the organization. The CFO had no idea which projects were on track, which would deliver real value, which overlapped. Nor did he have a sense of what resources were being consumed. But on Monday, the CEO would need answers to seemingly impossible questions: Will we reach our financial targets? Which projects are at risk and need management attention? And which projects, if any, should we cut? It would be a long weekend.

    In today’s business environment, scenarios such as this one are not uncommon. Few companies have the right governance structures, data transparency, and tracking mechanisms in place to effectively manage ambitious change initiatives. In most businesses, resources are tight and must be carefully allocated. The initiatives themselves are often more complex and interdependent than they were five years ago. Moreover, fierce global competition and quickly changing markets require fast results and real impact. And from corporate boards to capital markets, demand is growing for greater proof of the impact to be delivered and the organization’s ability to deliver it.

    The traditional project management office (PMO) wasn’t designed for today’s environment, and few have adapted to the new challenges. Often associated with bureaucracy and unproductive meddling, many PMOs are better suited to running a set of departmental projects on time and on budget than they are to managing a complex, interconnected set of cross-enterprise efforts tied to high-risk, mission-critical outcomes such as aggressive cost reduction, revenue enhancement, and turnaround situations.

    From PMO to SIO

    Very often, the PMO’s exact role is not well defined and lacks a sharp mandate, the right leadership, and a big-picture view of how different initiatives fit together. Moreover, the PMO typically focuses on process and timelines at the expense of high-priority issues and impact. Mission-critical change efforts require a different type of governance structure oriented toward value delivery—a strategic initiative office (SIO). An effective SIO shifts the focus from process to value, ensuring that milestones, timelines, and target impact are clearly defined and regularly tracked. (See Exhibit 1.)

    exhibit

    An SIO is needed under the following conditions:

    • When value and risk are significant. Senior executives must be able to track and carefully shepherd programs through to results, intervening much sooner if problems arise than they would for lower-risk efforts.

    • When multiple initiatives compete for scarce resources.

    • When critical cross-business, cross-functional interdependencies and complex stakeholder issues require explicit coordination.

    • When the nature and number of initiatives lead to a complexity that cannot be either efficiently or effectively managed with normal, day-to-day processes.

    The goal of an SIO is to ensure that an important, complex change program delivers full value with minimum disruption to ongoing business. To this end, the SIO prioritizes issues, flags potential problems as they arise, identifies and coordinates cross-team interdependencies, makes sure that decisions are made in a timely manner, and gets the right information to senior management at the right time. The SIO does not take on business-unit activities such as approving projects, assigning targets and incentives, creating project road maps, and implementing the solutions to problems and roadblocks.

    With less bureaucracy and a greater focus on providing insight, the SIO’s light-touch approach to tracking and reporting gives senior executives exception-based, forward-looking performance indicators across the full program of change and provides a “closed loop” of information. Closed-loop reporting across the entire enterprise is critical to avoid the potentially fatal mistake of the “squeezed balloon” effect—when pressure exerted in one area of the organization results in insufficient attention paid to issues and implications in another area.

    Armed with this critical programwide data, executives can spot troubling patterns and exercise their authority to intervene as needed in order to ensure that the program stays on track to deliver value. The SIO is the keeper of the fact base—a single source of truth—that all teams and the executive group can trust and use to make critical decisions.

    The CEO draws on an effective SIO to ensure that the program’s objectives are aligned with the overall goals of the organization. In effect, the SIO is an intermediary between the executive leadership team and the business line, and acts as an advocate and a resource for both—although its primary role is to support the executive team if conflicts arise. Indeed, the SIO acts on behalf of the CEO and the leadership team, helping to secure a successful outcome. It provides progress checks and management reports to executives, while supporting the line with accurate information and tools that are necessary to help drive the effort forward and hold the teams accountable for results.

    The SIO ensures that obstacles to success are identified, provides a forum for resolving those issues, and models effective, collaborative behaviors. An effective SIO doesn’t reinvent the wheel but instead draws from a common set of battle-tested tools and approaches, tailoring them to the organization’s specific needs. Typically, an SIO is set up for a specific purpose and time frame; it rarely lasts more than a few years without the backing of top management and the ability to adapt to new programs.

    Making It Work

    Based on our client work and an ongoing study of hundreds of major change efforts around the world, we have identified five actions that SIOs must take to be effective.

    Choose and support the right leader. The SIO leader must be an effective navigator of the organization, have explicit authority and credibility, and report to the CEO or a member of the executive committee. Project management skills are less important than a deep understanding of the strategic value and goals of the change effort and the related business issues, strong communication and persuasion skills, a respect for people, and a tenacious ability to solve problems. An effective SIO leader sees the big picture without losing sight of the details. In addition to ensuring that the right leader is chosen, top management must actively back and lend credibility to both the role and the person, and explicitly plan for the leader’s next career step. The position of SIO leader should be a pivotal, career-building role. Finally, the creation of a role mandate for the leader can help clarify expectations and increase credibility. The role mandate should capture critical individual and shared accountabilities, key parameters and performance indicators for success, and essential decision rights of the role.

    Keep top management actively involved. The SIO must actively involve senior managers and keep them from having their attention diverted—a major challenge given their competing demands and extremely limited time. It’s important to create a structure that keeps top executives hooked in and to update them regularly with a schedule of critical milestones, planned financial impacts, and clear accountabilities. Information—the right information, delivered in a timely, useful format—is critical to success. The SIO should not waste time with low-value status reports of on-track initiatives. Detailed activity plans are important for day-to-day execution, but they’re not what leaders need in order to lead. Instead, the SIO should give leaders exception-based reports that highlight what’s needed to get initiatives back on track. It should provide the smallest amount of critical data needed—the minimum sufficient—to drive impact and accountability. The goal is to have senior management expend the minimum effort for maximum results.

    Focus on what matters. Too often, change efforts get bogged down with hundreds of issues, all marked “top priority.” An effective SIO ensures that strategic, economic, and operational priorities drive the approval of only the most important, highest-impact initiatives. It then applies a rigor test to guarantee that initiatives are focused on the critical dimensions that drive success: time to results, progress toward critical milestones and bottom-line impact, and lead indicators that can flag structural or behavioral issues. By focusing on the information that really matters, the SIO delivers the insights needed to identify risks early on so that course corrections can occur in a timely manner. (See Exhibit 2.) The bank mentioned in the opening paragraph found that more than one-third of its 635 projects failed the rigor test. By redesigning, delaying, or killing these projects, the bank was able to direct more resources and executive attention to the most important projects with the highest impact.

    exhibit

    Mind the gaps. A challenging—and often hidden—problem in any complex change effort is the interdependencies among initiatives. Most teams are caught up in their own piece of the effort and lack the big picture needed to pull it all together. The SIO adds value by actively seeking out team leaders and identifying potential gaps so they can be resolved before they cause problems. The SIO’s high-level, cross-initiative perspective helps it ensure that these critical gaps are identified and addressed so that nothing falls through the cracks. But it should avoid the tendency to overengineer this process and make explicit only the most critical cross-initiative or cross-business interdependencies. Simple initiatives with a small scope (within a business or function) and few interdependencies rarely need coordination by an SIO.

    Play an “informed activist” role to maintain positive momentum. In our experience, change efforts that don’t start showing results within six months lose momentum. Although the line is accountable for program execution, the SIO keeps things moving forward by flagging potential problems early and involving the right people to fix them. The SIO is in a position to successfully escalate key issues and orchestrate discussions so that decisions get made. By providing a rapid pace, structured processes, clear accountability, and respect for the individual, the SIO helps minimize the common problem of good employees who end up doing the wrong things.

    SIO Staffing and Principles

    The SIO must include people from the business and its key functions. And all SIO staff—as well as the company’s employees—must be trained to use a common language in order to describe how value is defined and delivered and to ensure that all change-related communications are understood throughout the organization. Representatives from the support areas of finance (to pull progress reports together) and human resources (to develop retention and severance policies as needed) are often essential—although these functions can be separated into subteams rather than embedded in the SIO. Typically, once a change program reaches a steady state, staffing levels fall off sharply to two to four full-time people.

    Team members should have a breadth of capabilities, including analytical and communications skills, program management expertise, domain knowledge, and change management skills—along with a healthy dose of skepticism to keep efforts grounded in reality. Members typically rotate in and out for specific initiatives. Most important, the SIO should be a critical assignment for exceptional employees, not a wasteland for poor performers.

    An effective SIO is guided by key principles such as transferring organizational learning and respect for the individual. One of the ways the SIO transfers knowledge is by modeling a productive, collaborative style of interacting with business units, functions, and the corporate center. Adopting the attitude that people want to do the right thing—and that the SIO is there to help them—goes a long way toward building the strong, supportive relationships that lead to success. Without this positive approach, people are less likely to get on board and may undermine—rather than support—the change effort.



    Fast forward: With an SIO in place, our CFO and his C-suite colleagues can ask for and get a report itemizing the 10 percent of ongoing projects that are critical to the bank’s financial performance and deemed “too important to fail”—along with a quantification of how these initiatives will contribute to the bottom line and which milestones warrant attention. In addition, the executive team can flag problems early and keep the program on track, while avoiding time-wasting bureaucracy. Now that the SIO is focusing on critical projects and has established a proven track record of helping to deliver results, the bank has an enhanced ability to change—a strong competitive advantage in these turbulent times.



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