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How Frank La Rocca Created an Enterprise PMO at Consolidated Edison to driver greater ROI. Presented May 13, 2014 via Projects at Work webinar. For the full presentation, please visit http://bit.ly/1h0uesU.
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Changing the PMO Status Quo:
Learn how Frank La Rocca Created an Enterprise PMO at Con Edison to Drive Greater ROI
Frank La RoccaDirector of Business Improvement ServicesCon Edison
Email: [email protected]
• Director of Business Improvement Services at Con Edison
• Responsible for Investment Optimization and the EPMO
• Prior to Con Edison Frank was VP of IT and CIO at Keyspan
Introducing Frank La Rocca
Agenda & Takeaways
• Con Edison Introduction• Challenges that Led to the Creation of
EPMO• Financial Intelligence is Key
• Optimization (Annual Planning) process• Management (Agile / Dynamic
planning)• Measuring Business Value• Phased Approach to Financial
Intelligence• Questions & Answers
Takeaways:1. Building an Enterprise PMO requires
you to view project’s as business investments and focus on financials and value creation
2. Relying solely on Annual Planning can result in significant loss in planned business value
3. Dynamic Planning (aka Sweep) helps optimize spend and maximize business value
Consolidated EdisonIntroduction
One of the nation's largest investor-owned energy companies, with approximately $12 billion in annual revenues and $41 billion in assets
Provides a wide range of energy-related products; including electric,
gas, and steam service in New York City and Westchester County
Consolidated Edison: Serves 3.3m customers throughout a 604-square-mile territory Operates one of the most complex electric power systems in the
world, with the highest level of reliability in the world. Distributes natural gas to 1.1 million customers Operates the largest district-energy steam system in the U.S.,
providing service to approximately 1,800 customers
Consolidated EdisonCorporate Landscape
• Increased Cost Control• Maintain our infrastructure/service at or below inflation• Stabilize our rates• Maximize our investments
• Enhance External Relationships• Enhance regulatory relationship
Challenging Questions… Led to the creation of our Enterprise PMO
How much are we spending on
projects / programs?
Are our investments inline with corporate strategy?
What is the Strategic Value
of the Portfolio?
Are we getting the appropriate
ROI & Value from the portfolio?
Do we have effective metrics to gauge financial
performance?
Are we utilizing our discretionary
budget in the best way?
Pressure to “Do More with Less”
Select the question below that your PMO struggles to answer
Poll 1
The Statistics Are AlarmingTraditional PPM is Failing to Deliver Anticipated Results
33%of projects fail to get completed or implemented
of completed projects experience cost overruns
54%46%
Unrealized Business
ValueRealized
Business Value
43%of all projects are delivered late or over budget
Standish Group
Standish Group PMI
33%of projects do not meet their goals or business intent
Gartner
18%
UMT360
Create Select Plan ManageEvaluat
ePromote Standardization through Defined Processes, Workflow, and Templates
Standardize business case
Determine Strategic Value
High Level Cost/benefit Estimating
Contingency Estimating
Risk Impact
Strategic Alignment
Cost Optimizations
Resource Capacity Planning
Selected Portfolio
Schedule Mgmt.
Resource Assignments
Detailed Cost/benefit Estimating
Funding Approval
Variance/metric Reporting
Re-Investment “Sweep” Process
Scope & Schedule Delivery
Budget Utilization
Health Status Reporting
Year-End Review
Cost Benefits Realization Analysis
Scope Realization Analysis
Lessons Learned
$2bn – Process Managed by 2 Employees
$200m Pilot – 4 Employees Expanding to $2bn
Building the Enterprise PMOInvestment Optimization & Management
Optimization Management
What is Portfolio Management?A question I have struggled with over the years!
Aggregate reporting across one or more portfolios?Alignment of spend with strategic priorities?
Portfolio Management gives you the …Ability to have timely financial insights into all your portfolios to make informed business decisions to
increase the overall ROI..
Is It…
Common Annual Planning Challenges… Driving Need for Portfolio Optimization
• Disparate methods of receiving projects• Non standard business case
• Disparate financial models and calculations
• Disparate cost estimating methodologies
• Disparate method of linking benefit of strategic value
• Disparate methods of classifying projects• Mandated
• Operationally Required
• Strategic
• Projects are chosen based upon who submits and how fancy the “slide ware” is vs. the financial merit and strategic value
• Small business units often lose• Impossible to compare financial value
from one project to the next (apples to oranges)
• Either cost over-runs or under-runs• Unable to distinguish between “lights on”
and discretionary
Common Challenges Typical Results
Portfolio Optimization ProcessA well documented best practice
Business Driver Definition
Business Driver
Prioritization
Consolidate Project
Requests
Develop Business
Case
Prioritize Projects Against Drivers
Run Constraint
Analysis
Portfolio Review & Approval
Detailed Planning /
Business Case
Create SelectStrategy Plan
Seni
or V
ice
Pres
iden
t Lev
elVi
ce P
resi
dent
Le
vel
How many of you have implemented a similar optimization approach?
Poll 2
Regulatory Mandated
Operationally Required
Strategic - with Cost Savings
Strategic - with Cost Avoidance
Strategic - Other
In Flight
Building Our PortfoliosClassifying & Categorizing Projects; do you have this data?
# Project Name Original Project Budget
SAC Sanctioned
Releases
SAC Sanctioned Redirects
SAC Sanctioned
Budget YTD Actual
YTD Budget (Original)
Variance Variance
% YTD Actual
YTD Forecast (Q3
Revision) Variance
Variance %
Organization 1
1 Project A $11,850,009 ($9,100,000) $0 $2,750,009 $1,372,189 $11,850,009 ($10,477,820) -88% $1,372,189 $2,750,009 ($1,377,820) -50% 3
2 Project B $1,815,007 ($130,000) $0 $1,685,007 $1,674,614 $1,815,007 ($140,392) -8% $1,674,614 $1,685,007 ($10,392) -1% 1
3 Project C $1,357,005 $0 $0 $1,357,005 $1,543,006 $1,357,005 $186,001 14% $1,543,006 $1,357,005 $186,001 14% 2
4 Project D $1,144,000 $0 $0 $1,144,000 $1,091,251 $1,144,000 ($52,749) -5% $1,091,251 $1,144,000 ($52,749) -5% 1
5 Project E $991,015 $0 $0 $991,015 $955,915 $991,015 ($35,100) -4% $955,915 $991,015 ($35,100) -4% 1
6 Project F $920,022 $0 $0 $920,022 $824,115 $920,022 ($95,907) -10% $824,115 $920,022 ($95,907) -10% 2
Project Organization, Portfolio & Name
SAC Sanctioned Information YTD Variance Analysis vs. Original Budget YTD Variance Analysis vs. Q3 Rev. Forecast Project Status
The Usual…RAG Reporting & Variance Analysis
2009 2010 2011 201250
100
150
200
250
300
350
400
70%
75%
80%
85%
90%
95%
100%
244211
180 188200 194
175 170
82%
92%
97%
90%
Total Project Portfolio –Budget Utilization
Original Budget
Actual Spend
Original Budget Utilization %
Millions *
Budget Utilization & TrendsBetter Utilization & Value
What was your budget utilization last year?
Poll 3
Poor estimating erodes planned business value
Original cash flow does not reflect
new/recent information
Often PMs did not create the original estimate and felt “hostage” to the approximation
No standard method of creating estimates and no
formal contingency estimating
Limited formal estimating or
Project Management
training
The static nature of the annual
planning process, thwarts their
efforts
Culturally, it is better to
dramatically under-run than
over-run slightly; generally leads to
inflated cost estimates
Feedback from Project Managers…Driving the need for Agile or Dynamic Planning
Dynamic Reallocation (Sweep) In ActionAgile Reallocation of Funds to Maximize Portfolio Value
Release New Redirect
Quarter 2 $188,096,540 ($17,813,000) $8,278,491 $7,853,662 ($1,680,847)
Quarter 3 $186,415,693 ($8,655,000) $3,104,000 $2,804,000 ($4,427,847)
Quarter 4 $183,668,693 ($9,099,260) $6,167,318 $4,359,839 ($2,999,950)
($35,567,260) $17,549,809 $15,017,501 -19% 9% 8%
(Surplus) / Deficit
Total Sweep for the year
Quarter Start Budget
2012 Common Portfolio
Sweep Process • 23 new projects were funded due to timely releasing of funds; this traditionally would have been “left on the table”
• “Not a spend it or lose it” mentality. Sweeps need to be strategic
Annual Budget Planning – Optimized Portfolio
EPMO: Monthly Summary Portfolio Report
MonthlyDynamic Re-allocation Sanction Process
(Bi-monthly)Senior Officer Committee
Organization XPre-Sanction meeting
EPMO, Cost Managers, and Project Managers
• Monthly sanctioning process• Releases – every month• Re-directs – every month• New – every month• Re-forecasting – quarterly
• Annual ‘proposal’ to selection and optimization budget process
• Monthly Project Deep Dive:• Project Status review• Red, amber, green reporting• Variance reporting• Scope review
• Governance review• Senior officer update
Organization ZPre-Sanction meeting
EPMO, Cost Managers, and Project Managers
Organization YPre-Sanction meeting
EPMO, Cost Managers , and Project Managers
Where does the “Sweep” Process fit?
“Sweep” Governance Process
Releases New Requests
Sanction Process
Re-directs
New
Revised SAC Sanctioned
Budget
Any remaining funds not allocated to projects go back to the “pot” for next month’s strategic reinvestment
Releases always
ApprovedRe-Directs
Yes
No
Approved?
2009 2010 2011 2012 201350
100
150
200
250
300
350
400
0%
20%
40%
60%
80%
100%
120%
244
211
180 188 178200 194
175 170 179
82%
92%97%
90%
101%
Total Project Portfolio –Budget Utilization
Original Budget
Actual Spend
Original Budget Utilization %
Millions
*
• Our budget utilization rates have significantly increased over the years
• In 2013, this portfolio “gave back” $33m, to the Corporation and came in at full budget utilization
Budget Utilization & TrendsSo how did we do?
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec($10)
$40
$90
$140
$190
$240
$9 $15
$25
$39 $52
$66
$74
$85
$103
79.641389964839
97.6939291466768
121.558810417515
137.9
168.2
190.6
$7 $15
$24 $35
$49
$66
$76
$89 $103
$118
$137
$173
212
2013 Actual YTD Spend 2013 Projected YTD Spend 2011 & 2012 Average YTD Spend 2013 Original Budget
Qtr 1revision
Qtr 2revision
Qtr 3revision
The EPMO in ActionTrend Analysis; using data to Better Predict the Future
2013 Forecasting AccuracyAn Art and a Science!
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec($10)
$40
$90
$140
$190
$240
$8.8$15.1
$25.3
$39.3
$52.2
$65.7$73.5
$85.7
$103.4
$127.7
$143.6
$179.1
$7 $15
$24 $35
$49
$66 $76
$89
$103
$118
$137
$173
212
2013 Actual YTD Spend 2011 & 2012 Average YTD Spend 2013 Original Budget
•Original Budget was $212M
•Through the dynamic reallocation process we ‘gave back’ $33m
•The YE Actual Charges were $179.1M, slightly above the 2 year trend, but very close to the November year-end projection of 179.6M
Producing Metrics is Key to the success of your EPMO
Organization 2013 Requested
2013 Approved
2013 Actual
Charges
2013 Original Budget
Actual vs. Budget November Forecast
Actual vs. Forecast
Organization 1 $27,404 $22,442 $14,869 $22,442 ($7,574) -34% $15,991 ($1,122) -7%
Organization 2 $73,851 $62,864 $50,236 $62,864 ($12,628) -20% $48,050 $2,186 5%
Organization 3 $0 $0 $197 $0 $197 - $195 $2 1%
Organization 4 $11,105 $5,987 $3,650 $5,987 ($2,337) -39% $3,683 ($33) -1%
Developing Trends & MetricsForecasting Accuracy by Project
Developing Trends & MetricsForecasting Accuracy By Organization
Organization 2011 2012 2013Information Resources 18% 19% 12%
Facilities 41% 33% 27%
Organization A 23% 19% 12%
Organization B 26% 16% 26%
Organization C 23% 25% 8%
Organization D 43% 33% 40%
Organization E - 79% 3%
Organization F 55% 13% 3%
Organization G 64% 21% 28%
Organization H - 31% 61%
Total 38% 27% 26%
Dynamic Reallocation In ActionReasons for Releases by Organization
How to Measure Business ValueAssess Throughout the PPM Lifecycle
• Prioritization/ Optimization
• Strategic Value• Risk Reduction• Cost Benefit• Cost Avoidance
Execution – Calendar Year
• Value assessment• Year-end metrics• Budget utilization• Estimating accuracy• Forecasting accuracy• Degree of churn• Scope delivery• Financial savings
• Identify Continuous Improvement Opportunities
Annual Budget Planning Post Year-End Review
• Strategy change• Financial change• Scope changes
• Resource changes• Dynamic Re-allocation -
Sweep
OutputInput
CHURN
Developing Trends & MetricsPortfolio Churn Analysis
ReinvestmentTotal Over spendTotal Under spend
Original Optimized Portfolio
Give BacksQ1 Q2 Q3
Approved Increases Over-Runs New ProjectsUnder-Runs
Actual Portfolio = Original Portfolio – Give Backs – Under-Runs + Approved Increases + Over-Runs +
New Projects% Portfolio Churn = 1- (Original Portfolio – Give Backs – Under-Runs) / Original
Portfolio
$188M
$18 $9 $9 $14
$51M
27%
$15 $0
$15M
8%$17.5M
9%
$17.5
Developing Trends & MetricsPortfolio Churn Analysis
ReinvestmentTotal Over spendTotal Under spend
Original Optimized Portfolio
Give BacksQ1 Q2 Q3
Approved Increases Over-Runs New ProjectsUnder-Runs
Actual Portfolio = $170M
73% of Original Portfolio spent; 27% of Original Portfolio churned
$188M
$18 $9 $9 $14
$51M
27%
$15 $0
$15M
8%$17.5M
9%
$17.5
Financial Management. Foundation
Integrate with LoB Systems & Automate
Reports
Implement the Sweep Process
Establish Benefits Realization Framework
Phase 1 Phase 2 Phase 3 Phase 4
Portf
olio
RO
I Im
prov
emen
t (0
to 2
0%)
Incr
ease
Fin
anci
al M
atur
ity L
evel
(1 to
5)
20% -
15% -
10% -
5% -
- Level 5
- Level 4
- Level 3
- Level 2
A Phased Approach Yields ResultsIntegrated Project & Portfolio Financial Controls
Building A Credible Enterprise PMOFocus on Financials & Business ValueWhere we were
• Difficult to find a roster of all in-flight projects• Hard to track down the project managers• No formal tracking of start dates/end dates• No formal benefit estimating and limited follow up (except for large projects) • Limited project status reporting, no portfolio level reporting• No dynamic re-allocation process• No Project Management Society• No portfolio analytics/year-end reporting
• Budget utilization• Estimating accuracy
• Silo’ d budgeting vs. shared budgeting• Informal project manager training
While it may be hard to measure the power of the
PMO, each of these line items have increased the value we are getting from our portfolio
• Delivered value• Churn analysis
Thank Youvisit www.UMT360.com to learn more.
Frank La RoccaDirector of Business Improvement ServicesCon Edison
Email: [email protected]