Over the last decade, we’ve seen a significant number of enterprise transformations that offer huge opportunity to create value but have ultimately failed, some of them dismally.
Fiona Stanley Hospital, WA Shared Services, Queensland Health payroll and Customs’ ICS are just a few. In most transformation programs, things don’t usually get so ruinously out of control to the point where core business processes fail; there are usually too many checks and balances for that.
Usually transformation programs are delivered late, substantially over-budget and often not quite as they were ambitiously envisioned, as is the current case with Australia Post and Transport for NSW.
According to a McKinsey Consulting report in 2009, “It’s relatively rare for transformation programs to succeed; many surveys, including ours, put the success rate at less than 40 per cent, however more recent research underscores the fact that certain tactics promote successful outcomes.”
One of those tactics is establishing a transformation management office (TMO).
There is often a disconnect between the aspirations of many transformation programs and the reality of how they invest capital, capabilities and other finite resources.
While sophisticated frameworks abound for developing transformation programs, the attendant investment and execution frameworks are often rudimentary, convoluted, flawed or, worse, non-existent.
As the majority of transformation investment lies in project investment, transformation programs require a TMO that guarantees flawless execution at the right pace using rigorous and streamlined infrastructure that combines strategic perspective with disciplined implementation.
There are three mutually reinforcing reasons for implementing a TMO.
First, a TMO takes the lead in generating ideas for creating and realising value, constantly re-energising and re-focusing the transformation effort.
A TMO does this by supplying a sophisticated investment approach, which makes it straightforward for executives and front-line staff to generate transformation ideas and turn them into worthy projects.
Secondly, it conducts the rigorous analysis needed to confirm that all transformation investment is aligned and contributes to the transformation objectives.
Thirdly, it does not view process and compliance as its primary focus. It operates from a high performance, streamlined operating model in which transformation initiatives are invested in, executed and the value realised in the most efficient and cost effective way.
The central task of the TMO is to orchestrate the complex, often disruptive, change typically needed to achieve breakthrough value in transformation.
The traditional project management office (PMO), focused on administration and compliance, is poorly suited to the pursuit of the value creation opportunities presented by a transformation initiative.
The Department of Housing and Public Works (DHPW) in Queensland is undertaking a whole-of-government procurement transformation project and has implemented a TMO to manage the many strategic, operational, organisational and financial challenges involved.
In this case, the TMO performs three indispensable roles, which are:
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- To act as a central hub that arranges the requisite capabilities (processes, frameworks, models and technology embedded in a high performance PPM operating model) to invest in and deliver the large-scale change involved in implementing a whole-of-government procurement operating model.
- To offer a streamlined, cohesive and sophisticated governance model that directs investment in and execution of the projects most likely to deliver the procurement strategy.
- To provide a function that delivers immediate capabilities in project investment, execution, value realisation and change management. DHPW does not have the time or resources to devote to maturity uplift or process engineering long marches – procurement transformation requires sophisticated turn-key capability and fast.
In transformations that fail, these roles are rarely employed.
Successfully integrating a TMO
The Department of Housing and Public Works organised their TMO’s key success capabilities in two frameworks.
1. Portfolio management architecture. This provided the investment decision-making framework to align project investment to the procurement transformation objectives and quantified the way in which each program and project contributed to the procurement strategy. It also prioritised and optimised the project investment portfolio - in other words, picked the right projects.
2. Portfolio execution architecture. This sequenced the dependency, resource and change portfolios within the program master schedule to execute the portfolio which delivered the right projects in the most efficient way to achieve the transformation strategy.
Integrating the portfolio management and portfolio execution architecture with a well understood transformation framework sorts out many interrelated strategic and operational issues. It also provides the process for negotiating trade-offs among competing ideas and uses feedback loops to identify constraints and seek alternatives.
DHPW’s assistant director-general, procurement transformation, Mary Goodwin knew that it was not enough simply to bring these frameworks to bear. Placing the TMO in the right place in the transformation effort and executing both frameworks well through an integrated approach were the other parts of the battle.
Traps to avoid
Mary believes that there’s no single tactic to transformation success, it’s a matter of finding the right combination of tactics and capabilities and executing them well.
There are, however, some obvious traps to avoid. For instance, don’t expect a traditional project management office (PMO) to manage the transformation. Establish a fully equipped TMO with the correct authority and position within the organisation and staff it with experienced transformation specialists. Don’t deliver a list of ‘transformation’ projects to the PMO and tell it to get on with it.
“Having the right TMO leader is very important. Often, a typical PMO manager is poorly equipped to provide the sophisticated capabilities required of whole-of-enterprise transformation, says Goodwin.
“In addition, the TMO governance model, which we are still working through, should be a microcosm of the existing organisation with its own empowered ‘c-level’ executives – all of whom control the transformation effort.
“The final trap is to avoid process engineering. Understand the specific capabilities and pace required of whole-of-government transformation and rapidly deploy turnkey TMO capabilities. To do this, we needed specialist transformation consultants with highly developed TMO expertise and IP.”
One of the worst transformation environments we’ve seen in recent times was run by a non-TMO specialist, former Big 4 consulting partner who had an odd aversion to best practice.
We could never convince him of the efficacy and cost efficiency of a high performance PPM operating model, despite compelling evidence to the contrary.
He continued to ladle process on top of methodology on top of meeting structure until the entire project administration cost ran at an unpardonable 34 per cent of total transformation budget.
He could not be convinced of swapping more and more process for a streamlined but highly efficient investment and execution environment.
At the start, many of Australia’s transformation strategies have invariably set unambiguous, aspirational targets; created a clear structure; promoted speed and collaboration throughout the organisation; and exercised strong leadership.
Yet, as the transformation program progresses and objectives are not met, the outcomes frequently fall short of their aspirations and head in counterproductive directions, often becoming myopically fixated on cost and complexity.
To avoid this, companies should employ a strategic yet action-oriented TMO; it just may be the difference between transformation success and failure.
Corinne Forrest is the head of PPM Strategy for PPM Global Consulting.
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