Project Management Offices are becoming more and more important because they have to work with a company's framework and cost models. That means PMO leaders have to show that their unit is worth the money they spend on it and figure out how to charge people for their services. We'll talk more about charging for services in another article. For now, let's talk about the two main ways that PMOs get money.
They come in two main types: temporary and permanent. They both have different ways of getting money.
Ist model is "Temporary PMOS."
A temporary PMO is set up for a project or program. It is only for that project or program, and it will be disbanded when the project or program is done.
Because it's only for a short time, the costs for the PMO can be worked out in detail. You can add the cost of running the PMO to the project's business case.
However, make sure that the business case for the PMO is separate from the main costs for the project's deliverables and the rest of the project requirements. If the project goes over budget, your PMO costs will go up, and it's important to know that. This is part of the reason.
A monthly "fee" for the running of the PMO could be added if you can. This way, if the project runs over, you can quickly see how much extra money it will cost to have the PMO. If the project is done early, you'll be able to see how much of a benefit it was to shut down the PMO early.
On the subject of shutting down, don't forget to include costs for decommissioning in the business case when you write it. They probably won't be very big, but you'll have to redeploy people, get rid of any temporary office space, move archived files to a new place, and so on.
2nd model: PERMANENT PMOS.
It's different from a PMO that's set up for the long run. There are a lot of costs to this, and how your organization deals with the costs may be different.
How to deal with the PMO's costs? You can put them into the running of your head office. Having a PMO is part of the cost of running a business. The PMO leader's budget is part of the whole budget. There will still be a lot of explaining and budget talks to do, but this way, there is no cross-charging out to other parts of the school. Any money you need for the PMO comes from a single source.
The PMO, on the other hand, isn't just a cost center for many businesses. They want to be able to split the cost of running an on-going PMO in a way that fits better with their accounting and management practices. This can also give the business a better idea of how much the PMO costs.
Another way to get money for your PMO is to figure out how much it costs to use the PMO and divide that cost between the departments that use it. For example, if one business unit is in charge of 50% of the projects, they are charged 50% of the costs of running the PMO.
Using this method, you don't have to give each project its own manager or service. In that way, it's easier, but it's also a lot of work in its own right!
The first thing you need to do is figure out how to divide up the cost. These could be:
Count of projects
A lot of things were used on the projects.
Value of the project in money (or some other measure of benefits).
When you look at the PMO portfolio, you have to decide how much of the cost of running the PMO should go to each department based on how much they use the PMO.
Their use of services may change over time, so be aware of that. You'll have to figure out some rules for how to use this method so that it is seen as fair and your team doesn't have to do a lot of manual cost calculations every month.
It's also possible to charge other departments for the PMO's work, either in full or part, by figuring out how to charge staff and services from other departments.
The business case for your PMO
It doesn't matter if you decide to set up a temporary PMO or a permanent one to help your organization for a long time. You'll need to put together a business case to show and explain the costs.
To make a business case, you need to think about how much it will cost to start and run the PMO and how much it will cost to stop. Any PMO will cost money to run and to improve its services, but there will also be costs for that. In the business case for your PMO, write down what you want to do in the future. For example, if you want to use project management tools like Primavera across the whole company, write that down in the section about future investments.
The sooner you make decisions about how your PMO will get money, the easier it will be to get the money and talk about how the PMO helps your company. How much does it cost the business to have a PMO? This way, senior management teams can figure out how much business value it brings to the company. It's possible that the costs will be outweighed by all the great things you and your team do.
In the end, each business is unique. However, as a PMO leader, you'll need to think about how to get money for your PMO so that you can provide a great service to the business teams you help, both now and in the years to come.
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