Application 2 – Annotated Bibliography
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OutsourcingOperationsinProjectmanagementofficesTherealityofbrazillianCompanies.pdf
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INTRODUCTION ■
T o provide a high volume and diversity of new products, whether goods or services, organizations are required to constantly develop new orga- nizational skills. In an economy of global competition, it is becoming increasingly difficult to create value using only the skills and resources
within an organization. Therefore, the speed with which firms need to respond to the market and the call for diverse products are forcing business- es to invest in forming strategic business alliances (Doz & Hamel, 1998).
Modern companies in a market characterized by great change and com- petition cannot dominate the entire supply chain for the satisfaction of their customers. For this reason, some firms have begun providing services via strategic outsourcing in areas previously regarded as strategic and essential by some organizations (Quinn, 1992a). Companies that internalize the wrong business activities risk losing strategic focus and becoming bloated and bureaucratic (Barney, 1999).
Organizations compete for consumers, capital, and market share through products and services that respond to the clients’ needs. Companies’ core competencies are the combination of innovation of knowl- edge, special abilities, information and technology, and the unique method of operation that will result in a product or service that consumers will find valuable, and will want to buy. Organizations have different capabilities and competencies, but only a few of them are combined and integrated in a way that can be classified as core competencies. If a competency is not able to create products or services that are considered remarkable by consumers, this competency is probably not a core competency. Temporary competen- cies, which are easy to imitate and dominated by a few individuals who can leave the organization, taking these competencies with them, also are not core competencies. The remaining capabilities and competencies, which are important for the success and survival of the organization business but do not represent the reason for its success, can be identified as essential or sup- port competencies, but those are noncore competencies (Greaver, 1999).
The building blocks of corporate strategy are not products and markets, but business processes, and competitive success depends on the transfor- mation of an organization’s core processes into strategic capabilities that consistently provide superior customer value. With this strategic focus on business processes, outsourcing of business is emerging as a viable approach for the acquisition of strategic capabilities for the enhancement of competitiveness (Bharadwaj & Saxena, 2009; Saxena & Sangeeta, 2009).
Outsourcing Operations in Project Management Offices: The Reality of Brazilian Companies Vergilio Antonio Martins, Naval Architecture and Ocean Engineering Department, University of São Paulo, São Paulo, Brazil Marcelo Ramos Martins, Naval Architecture and Ocean Engineering Department, University of São Paulo, São Paulo, Brazil
ABSTRACT ■
The purpose of this study is to explore the mechanisms that influence decisions regarding outsourcing competencies in the operation of project management offices (PMOs). The exploratory research described here involves the use of a web-based survey for enterprises in Brazil. In 78 of the survey’s valid cases, the PMO is operated using the organization’s internal resources. A possible conclusion is that the PMO is unlikely to positively relate to the culture of external services used by the organization and to use outsourcing to operate the PMO.
KEYWORDS: project management office (PMO); project management competency; strategic outsourcing
Project Management Journal, Vol. 43, No. 2, 68–83
© 2012 by the Project Management Institute
Published online in Wiley Online Library
(wileyonlinelibrary.com). DOI: 10.1002/pmj.21256
April 2012 ■ Project Management Journal ■ DOI: 10.1002/pmj 69
According to A Guide to the Project Management Body of Knowledge (PMBOK® Guide), “project manage- ment is the application of knowledge, skills, tools, and techniques to project activities to meet the project require- ments” (PMI, 2008, p. 6). Project manage- ment can be defined as all the modern technical and managerial resources that facilitate the achievement of the expected project results in terms of cost, time, and scope ( J. K. Crawford, 2002). As companies realize the impor- tance of developing project manage- ment skills, they increasingly recognize the need to develop these skills within the organization. Thus, many compa- nies have considered implementing and operating a project management office (PMO), whose main responsibili- ties would be integrating competencies and resources throughout the organiza- tion’s functional lines and helping the project manager, allowing projects to be more effective. The implementation of a PMO, or, more broadly, the adop- tion of techniques related to project management, involves changes in the organizational culture, including the way the company plans, implements, and monitors projects (Kerzner, 2009).
Nevertheless, despite growing interest in the adoption of a PMO’s related concepts, there are factors that restrict such adoption efforts. These factors are related to economic issues, cultural issues, and technical training and management ( J. K. Crawford, 2002).
This article presents an analysis and discussion of the possibility of out- sourcing project management, specifi- cally the operation of a PMO. The exploratory research described in this work involves the use of a web-based survey for enterprises in the Brazilian market. In 78 of the survey responses, the PMO is operated using the organi- zation’s internal resources.
The article is organized as follows: the next section identifies the problem and the objectives of the research, fol- lowed by a literature review relevant to
the key elements in this study: project management, PMO development, orga- nizational skills, and alliances and out- sourcing. The next section proposes a model that integrates the variables used to solve the problem, and the fifth sec- tion presents the methodology used in this study. The last two sections present the findings, possible contributions, and conclusions of this research proj- ect.
Research Problem and Objectives The use of outsourcing as an alternative way to operate a PMO is explored in this research. It has been suggested that the research problem is the following:
There would be a conflict between, on the one hand, the process of identify- ing and developing competencies1 in organizations generally, specifically those required for implementing a PMO, and, on the other hand, deci- sions regarding what should be done by internal and external organiza- tional resources.
In seeking to further explore this matter, we hope to contribute to the understanding of the possibilities that organizations can explore to create high-quality PMOs and position them- selves as world-class companies. This study is intended to identify not only the conditions under which outsourc- ing becomes a viable option, but also successful strategies in outsourcing PMOs.
Outsourcing decisions, which are frequently referred to in the literature by aliases such as “vertical integrations” or “make-or-buy judgments,” are an important aspect of most organizations’ overall strategic plans (Gottfredson, Puryear, & Phillips, 2005).
Companies that have successfully developed their organizational compe- tencies should find it easier to delegate tasks and services to external suppliers or third parties, even if these tasks and
services are considered to be strategic (Quinn, 1992a). For example, information technology (IT) services require intense intellectual work and in many cases can be purchased from a third-party service provider. In the same way, competen- cies related to project management, particularly the deployment and opera- tion of PMOs, can be provided through outsourcing, even if they are consid- ered strategic. With this condition in mind, this study seeks to meet the fol- lowing specific objectives: • To determine the mechanisms that
influence decision making regarding the adoption of outsourcing of the PMO services when they are related to organizational skills
• To understand the relevance of a PMO and its alignment with organizational competencies
In the literature, there are extensive references to current cases illustrating the two concepts that are explored in this research: the development of PMOs (Aubry, Hobbs, & Thuillier, 2007; J. K. Crawford, 2002; Englund, Graham, & Dinsmore, 2003; Kerzner, 2003; Rad, 2001) and outsourcing (Franceschini, Galetto, Pignatelli, & Varetto, 2003; Greaver, 1999; Quinn, 1999, 2000). The body of literature is indicative of the reality for organizations seeking to increase their project management skills and develop new relationships within the service chain, which encom- passes both the company and its ser- vice providers.
Literature Review This review summarizes the a priori limits of the research on the effects of outsourcing as related to project man- agement and therefore to project man- agement offices. With the intention to identify the answers to our research questions, this section covers three bodies of literature. First, it presents a discussion of the process of developing organizational skills and considers the influence of clients on the decision- making skills of an organization. Then,1 The term competency will be defined in the literature review.
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it reviews the concepts related to strate- gic outsourcing. Finally, it reviews the concepts related to PMOs, which are part of the definition of projects, through PMO definitions and proce- dures for identifying and implementing its functions.
The concept of organizational com- petency has its roots in the idea of organizations as a portfolio of resources (the “resource-based view of the firm”). The perceptions of the market structure and firm’s strengths and weaknesses determine the choice of corporate strategy and organization- al structure (Caves, 1980). More formal- ly, the resources of a firm at a given time can be defined as those (tangible and intangible) assets that are linked to it. Examples of resources include brands, domestic technological knowledge, professional skills, sales contacts, machinery, procedures, and capital (Wernerfelt, 1984).
It is important to distinguish between the terms “competency” and “competence.” Competency is the behavior required for effective work; it is not the work itself. Work consists of a series of deliverables, outputs, or roles that are required alongside a number of individual competencies. Thus, a com- petency is a characteristic of the indi- vidual; it is an area of knowledge, a skill, or an attitude that will significantly affect a person’s work. On the other hand, competence is related to an indi- vidual’s performance or proper func- tioning within an office environment; in other words, it is related to the results of the work. Hamel and Prahalad (1994) defined core competencies as the door to future opportunities for enterprises. They are a set of skills and technologies that enable a company to provide ben- efits to its consumers.
It is not easy to identify core com- petencies. Many organizations spend years without formally identifying them. An organization may not recog- nize its core competencies because it is unable to understand the perceptions of its customers.
The competencies of greater value are those related to services offered by modern organizations. These organiza- tions are conceptualized as smart com- panies; they convert their brainpower into integrated services that address the most common perceptions of their cus- tomers. Companies that dominate in terms of their knowledge of laws, finance, architecture, applied research, education, consulting, or projects can sell the intelligence and qualifications of their professionals. This scenario is different from the one encountered by manufacturing firms; materials have a lower intrinsic value without employ- ees’ involvement, and their value increases only when they are processed using procedures derived from activi- ties in knowledge-based services (Quinn, 1992b). To be globally competi- tive in the present and future, compa- nies must work rapidly, and they must cultivate a strong sense of direction and purpose. Common sense would suggest that the best way to achieve this goal would be to use a single organization, not a heterogeneous alliance of part- ners. However, few organizations are capable of competing alone. The idea that many heads and many comple- mentary sets of skills working together is optimal is intuitively appealing (Doz & Hamel, 1998).
The disruptive innovation model of Christensen and Raynor (2003) empha- sized that the mere categorization of items as essential/nonessential can lead to serious mistakes that can be fatal to a company. In addressing the question of integration or outsourcing, companies should ask, “What do we need to master today, and what will we need to master in the future in order to excel on the trajectory of improve- ments that customers will define as important?” (Christensen & Raynor, 2003, p. 126). The only way to see the future accurately is to recognize the need for “circumstance-based theory to describe the mechanism by which activities become core or peripheral” (p. 126). Customers do not buy a product
or service unless it addresses a major problem.
Some organizations do not manage to secure competitive advantage by focusing “inward”; therefore, these organizations have begun to turn their attention “outward.” We derived a new paradigm of competition, which is based on the philosophy that customer focus is necessary for a firm to provide more value than the competition. In services, there are a set of activities that a firm must pursue for the value pack- age offered to the customer to meet his or her expectations. A company needs to strategically determine which activi- ties it will support with its own resources and which it will outsource. This classic make-or-buy decision affects the design of the supply chain and may lead to vertical integration (Corrêa & Caon, 2002).
Traditionally, make-or-buy deci- sions were primarily based on the concept of marginal cost, or, more pre- cisely, transaction costs (Williamson & Masten, 1999). The idea, which remains present in organizations, is to specify the conditions under which an organi- zation can create better economic value for itself than it would create in partnership with external suppliers (Barney, 1999). If the marginal cost of running the activity is lower than the marginal cost of outsourcing it, the for- mer is the best solution. Otherwise, the reverse would be true. However, after the 1990s, another factor began to be seriously considered: whether or not the activity represents a core compe- tency (Corrêa & Caon, 2002).
Outsourcing is the act of transferring recurrent internal processes and the rel- evant decision-making power to a provider or external supplier. Production factors, which are resources that are required to conduct activities, including people, facilities, equipment, technolo- gy, and other assets, are also transferred. As companies transfer their activities to an external provider, they delegate the right to make decisions regarding the operation of those activities, including
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how to optimize production factors. Outsourcing becomes strategic when it corresponds with the company strategy, when the benefits of outsourcing are sus- tained for many years, and when the results, whether positive or negative, have a significant impact on the organi- zation (Greaver, 1999).
The two actors in the process of outsourcing are the “taker” and the “supplier.” The former (i.e., the client) outsources its processes, whereas the second, the supplier, delivers the con- tracted services. In the 1990s, progress was made with regard to outsourcing, the traditional strategic model. Outsourcing is traditionally considered to be optimal if the process is not seen as critical to the “taker” company. This scenario is the case for activities that do not require specific supplier competen- cies (Franceschini et al., 2003). Outsourcing is strategic “when compa- nies move to outside suppliers every- thing except those special activities that may represent an extreme competitive- ness” (Quinn & Hilmer, 1994, p. 47). Outsourcing becomes strategic when it is aligned with company strategy, when the benefits of outsourcing are sus- tained for many years, and when the results, whether positive or negative, have a significant impact on the orga- nization (Greaver, 1999).
Once strategists have clearly defined the activities at play, relating them to channels of value of service, they can identify an external provider that, because of its particular expertise, can offer these services at a higher level of quality or at a lower cost than the company itself would offer (Quinn, 1992a). Each opportunity for outsourc- ing comes with the opportunity to cre- ate innovation within the organization. There are common reasons why out- sourcing can be beneficial. It can be used to address resource limitations, provide expert talent, distribute risks among suppliers, provide attractive talent, and confer the capacity for rapid business transactions (Quinn, 2000).
The implementation of an opera- tion requires a series of decisions aligned with the strategic and tactical goals of the organization. There are two strategic approaches that, when prop- erly combined, allow managers to lever- age their resources above current levels. First, firms can focus their resources on core competencies—those that create a unique value for customers. Second, firms can strategically use external resources (strategically outsource), hir- ing other firms to perform activities that the company does not consider to be critical in areas where it has no special ability (Quinn & Hilmer, 1994).
Core competencies do not repre- sent products or things companies do relatively well; they are those activities (usually based on services or systems) that the company performs better than any other company, at the level described as “best in the world.” Essentially, they are areas in which the company creates high value for its cus- tomers. To create more effective core competencies, a company should focus on a few (two to four) functions for which it can build and maintain this level of excellence, providing a flexible platform for future innovations. Once the company has developed its core competencies, areas that should not be outsourced should be built in a ring around the nucleus of core competen- cies to protect this core, or demanded by clients (Quinn, 1999).
Business process outsourcing (BPO) is defined as the movement of business processes from inside the organization to external service providers, in a form of interorganizational relationship that involves two separate agents—the BPO client and BPO service provider—in contractual terms. Any BPO initiative starts with the BPO client expecting a value delivery in the operational process (cost reduction, improvement of process performance, etc.) proposed by the service provider; on the other hand, the service provider also expects a business value addition (such as busi- ness growth, longer client retention,
etc.)—it is a “win-win relationship” (Saxena & Sangeeta, 2009).
Firms must take into account their priorities and circumstances when deciding whether and what to out- source. Toward this end, Kruse and Berry (2004) suggested the following steps: 1. Know the strategy and vision of your
business. 2. Select candidate suppliers. 3. Specify and develop the scope of
supply. 4. Conduct a feasibility study. 5. Develop a business plan (business
case). 6. Select and care for suppliers. 7. Negotiations and contracts. 8. Implement outsourcing program. 9. Conduct vendor (supplier) manage-
ment.
According to Gottfredson et al. (2005), the firms need three steps that can ensure that decisions are made objectively and based on facts: 1. The first step is to identify the com-
ponents of your business that repre- sent the core of the core—activities that your company does better and cheaper than its rivals.
2. The second step is plotting each of your required capabilities on a sourc- ing opportunities map, and asking, “What should you outsource?” This map will help you determine which key capability gaps your company needs to fill.
3. The third step is a kind of reality check, in which you determine whether a capability that is a strong candidate for strategic outsourcing can be carried out from a distance without any loss of quality.
In general, the literature establishes that the main goal of project manage- ment is to preserve the balance among the following restrictive elements of projects: cost, time, and scope. In this sense, the success of projects is related to the degree to which a firm succeeds at achieving these goals. The success of
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projects is linked to the concept of excellence in project management (Kerzner, 2003). According to Kerzner (2009), a project is successful when it is: • within the allocated time period; • within the budget cost; • at the proper performance or specifi-
cation level; • with acceptance by the customer/
user; • with minimum or mutually agreed-
upon scope changes; • without disturbing the main work
flow of the organization; and • without changing the corporate
culture.
Moreover, Kerzner (2009) stressed the importance of project management to success of projects: “But in order for a continuous stream of successful proj- ects to occur, there must exist a strong corporate commitment to project man- agement, and this commitment must be visible” (p. 8). In a study of project success, four points were used to sum- marize the literature review and empiri- cal findings of project success indicators. As noted, each criterion alone is insuffi- cient to measure success ( Jugdev & Muller, 2005): 1. Success criteria should be agreed on
with the stakeholders before the start of the project and repeatedly revisit- ed throughout the project.
2. A collaborative working relationship should exist between the project owner (or sponsor) and the project manager, and both should view the project as a partnership.
3. The project manager should be empowered with the flexibility to deal with unforeseen circum- stances as he or she sees fit, and the owner should provide guidance as to how the project can be best com- pleted.
4. The owner should take an interest in the success of the project.
The development and adoption of methods for managing projects require profound changes in organizational
culture at various levels of competency (Rabechini, 2003).
Toward this end, Rabechini (2003) proposed an analytical model defined by three basic conceptual pillars (Figure 1) that can provide support to the three layers of the institutionalization skills involved in project management: indi- viduals, teams, and organization. During the last three decades, project management has evolved greatly, directly affecting both individuals and organizations, as evidenced by several experiments intended to develop capacity in project management. These developments emphasize the increas- ing importance of project management (L. H. Crawford, Hobbs, & Turner, 2006), which is transitioning from a purely operational practice to a method of strategically aligning management sys- tem projects (Cooke-Davies, Crawford, & Lechler, 2009).
As organizations develop an organi- zational culture geared toward the practices necessary to successfully manage their projects, the importance of creating PMOs increases. This con- cept has been operationalized within organizations and outlined in the litera- ture, but there is still no consensus regarding the definition and functions of the PMO. Rabechini (2003) described some definitions of PMO, including the following: • Administrative mechanisms whose
focus is project management activities within an organization
• The location in which project man- agement takes place within the organ- ization
• A center for corporate control of intel- lectual property management projects
• A centralized organization dedicated to improving the practices and results of project management.
Despite the growing presence of PMOs in the professional literature and the fact that they have existed since the 1950s, there is little consensus regarding the role of PMOs, the justification for creating them, and the steps necessary to implement them. For Aubry et al. (2007), “a review of the literature does not provide a clear conceptualization or definition of organizational project management, specially for the lacking two elements: theoretical foundations and valid, verified empirical models” (p. 328). However, these authors affirmed that the need for PMOs arises when a firm is taking on a large number of proj- ects of greater complexity, and it has emerged that PMOs can facilitate cen- tralized project management. Aubry et al. suggested that a PMO is
a translation center where informa- tion from projects originates from different sources and is then inte- grated in intermediate deliverables to be disseminated at different lev- els within the organization. These activities of translation give rise to debates between actors, and result in successively strengthening some
Teams
Personal
Organizational
Processes Strategies
Changes
Figure 1: Competencies model in project management—Success-critical factors (Rabechini, 2003).
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networks to the detriment of others. (p. 334)
However, in a more widespread practice of organizations, this research assumes that there is a degree of under- standing within the organization’s role and necessity of the PMO. We highlight a classical setting:
A project management office (PMO) is an organizational body or entity assigned various responsibilities related to the centralized and coor- dinated management of those proj- ects under its domain. The respon- sibilities of a PMO can range from providing management support functions to actually being respon- sible for the direct management of a project. (PMI, 2008, p. 11)
The literature presents different definitions of PMO implementation. According to J. K. Crawford (2002) and Englund et al. (2003), a PMO can be divided into three basic levels: • Level 1: Control Project Office • Level 2: Business Unit Project Office • Level 3: Strategic Project Office
At Level 1, the office focuses on a sin- gle project whose design, size, and com- plexity are so great that they justify the existence of such a structure. At Level 2, the office integrates multiple projects of various sizes and levels of complexity, improving the efficiency of resource shar- ing between projects. The Level 3 office works on the corporate level; it identifies and prioritizes projects related to the organization’s strategy, including deci- sions regarding resource use. It is worth emphasizing that the three levels of PMOs can coexist within the organization.
According to Rad and Levin (2002), many organizations consider the PMO in terms of a series of five levels, in the same vein as a project management maturity model: • Level One: PMO might support just
one project. • Level Two: PMO would support sever-
al projects under the same program.
• Level Three: PMO would support a divi- sion or department in the organization with all of its projects.
• Level Four: PMO would support the organization in its projects.
• Level Five: PMO would be placed strategically at an executive level and would support business strategy deci- sions and resource allocations throughout the enterprise.
A survey of 1,000 individuals ran- domly selected from the 35,880 mem- bers of PMI in North America, of which 234 (23.4%) responded, highlights two points among others (Dai & Wells, 2004): • Many organizations are moving
toward establishing PMOs or have already done so, demonstrating a high level of management confidence in the utility of this innovation.
• There is strong evidence that project management standards and methods are highly correlated with project per- formance. This PMO feature should take priority over the others studied, whether a formal PMO entity is being established or not.
The PMBOK® Guide emphasizes that the PMO can operate on a continu- ous basis, from providing support func- tions to project management in the form of training, software, standardized policies, and procedures, to actual and direct management responsibility for achieving the goals of the project. In addition, “a PMO may be delegated the authority to act as an integral stake- holder and a key decision maker during the beginning of each project, to make recommendations, or to terminate projects or take other actions as required to keep business objectives consistent” (PMI, 2008, p. 11).
Research Analysis Model This study proposes a model for analyz- ing the positioning of organizational competencies related to PMOs, taking into account some elements of deci- sions intended to determine how many of those competencies should be bol-
stered using internal rather than exter- nal resources. Figure 2 presents the framework for the model proposed in this study.
The central axis, which is represent- ed by a horizontal line in Figure 2, with two arrows pointing in opposite direc- tions, seeks to indicate the position of the PMO within the framework of orga- nizational competencies. At one extreme (on the left side in the figure) are the internal competencies (best-in- world)—that is, the competencies con- sidered to be central and essential to the organization, as suggested by Quinn (1999). At the other end (on the right side) are the external competen- cies, those that can be executed by external suppliers. The frame of refer- ence for the model indicates that the positioning of the PMO may move along the central axis of the organiza- tion’s competencies, as it is influenced by both customer perceptions regard- ing the importance of the PMO as an organization’s internal competency, and aspects of the organizational cul- ture that influence the use of external resources on competencies necessary for the development of its operations.
In addition to the influence of the organization’s clients and the culture of outsourcing, there are other factors that contribute to determine the PMO’s posi- tion on the axis of competencies: issues related to operational factors necessary for the PMO’s operation and, of great importance, the organization’s degree of maturity regarding project management.
Three operational factors are the basic elements of all PMO operations: people, processes, and IT systems. The set of procedures necessary for a PMO- related operation is based on these three operational factors, and its per- formance depends on the degree of specificity involving each of these ele- ments. Investments in training skilled personnel, the development of opera- tional methods with the PMO, and the acquisition of IT systems may create economic restrictions on the deployment and operation of PMOs.
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A PMO centralizes decisions about the choice and maintenance of software tools to support project management. The PMO is also responsible for the development and maintenance of processes and methodologies relevant to project management. One element of maintaining methods and standards is the need to continually examine the development of best practices at other companies. In the same way, the PMO is the central location for the project man- ager and training team, providing the skills necessary for the development of every project’s team members ( J. K. Crawford, 2002).
Another consideration that influ- ences the positioning of the responsi- bility for PMO operations considered in this analysis model is the firm’s project management maturity level. The level of maturity with which the organization handles the various areas of project management (projects, programs, and portfolios) should influence the skills of the PMO. Strictly speaking, a mature level of project management is linked to the culture of the organization regarding project management. Therefore, the cultural qualities of the organization reflect the sector environ- ment in which the organization is inserted.
This study combines the following assumptions, as expressed in the fol- lowing questions:
Question A—What is the positioning of the PMO in terms of the develop- ment of its organizational competencies?
• Hypothesis 1 (QA.H1)—There is a rela- tionship between the firm’s degree of project management maturity and the character of the PMO regarding the align- ment of organizational competencies.
The intention of Hypothesis QA.H1 is to investigate how the degree of maturity of the organization in project management and program and portfolio development is related to the alignment of PMO organiza- tional competencies.
• Hypothesis 2 (QA.H2)—There is a rela- tionship between the stage of opera- tional factors (equipment, processes, and systems) and the character of the PMO concerning the alignment of organizational competencies.
The purpose of Hypothesis QA.H2 is to investigate how the operational qualities of the organization are relat- ed to alignment of the organizational competencies of the PMO.
Question B—Under what circum- stances can an organization adopt strategic outsourcing as a way to devel- op and operate a PMO?
• Hypothesis 1 (QB.H1)—The decision to operate a PMO via an external provider is positively related to a ten- dency to outsource strategic activities.
The motivation for Hypothesis QB.H1 is to investigate the cultural aspect of organizations in terms of whether they use external suppliers to operate processes that are seen as connected to core competencies.
• Hypothesis 2 (QB.H2)—The decision to operate a PMO using an external provider is positively related to the perception that the customer has regarding the character of PMOs con- cerning the alignment of organiza- tional competencies.
The motivation for Hypothesis QB.H2 was to investigate any possible relationship between the decision to use external suppliers to operate a PMO and client perceptions regarding whether the PMO constitutes an orga- nizational core competency.
The variables associated with the proposed model of analysis are listed in Table 1.
Research Methodology Surveys are often performed to facilitate descriptive statements about a popula- tion: that is, to discover the distribution
Clients’ Perceptions
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OPERATIONAL FACTORS
MATURITY IN PROJECT MANAGEMENT
PMO Positioning
OUTSOURCING: Decision Factors
Figure 2: Research analysis model framework.
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of certain traits and attributes within a particular group. In these instances, the researchers are not concerned with the reason for the observed distribution; they simply wish to know that it exists. A research survey, like other types of field studies, may contribute to the advance- ment of scientific knowledge in differ- ent fields (Babbie, 1990).
The survey research strategy employed in this project aimed to gen- erally investigate the real status of Brazilian companies and assess how those organizations distribute the com- petencies of their PMOs. There are sim- ilar studies about the implementation of management models that use out- sourcing in areas hitherto considered to be support areas for Brazilian organiza- tions. Therefore, this research project’s approach is confirmatory, as it affirms that noncore competencies are poten- tially suitable for outsourcing, as well as exploratory, as it studies the outsourc- ing of PMO operations, an area that the literature has not previously explored.
E-mail was used as an essential ele- ment of the communication method to gather research data in this study. In 2007, a self-administered questionnaire was distributed to the respondents.
An investigator was not present when the respondents were generating their answers. The first step was to draw up a questionnaire that would be available on the Internet. The respondents were encouraged to access the questionnaire through invitations sent by e-mail.
To analyze the data collected in this research, a non-parametric statistical method was used to test the hypotheses through survey questions. The non- parametric method was chosen because it allows one to test data with a distribution that is not known and can- not be assumed (Conover, 1999; Forza, 2002). An important class of non-para- metric tests is made by the so-called tests of adhesion, where the hypotheses tested refer to the shape of the popula- tion’s distribution. In these tests, it is accepted by definition that the distribu- tion of the population’s variable of interest is described by a model of dis- tribution of probability, and to test this model means to verify the good or bad adhesion of the sample data to the model. If the model has a good adhe- sion and the sample is fairly large, one can, in principle, admit that the model provides a good idealization of the pop- ulation’s distribution (Costa Neto,
2005). Conversely, the rejection of the null hypothesis (H0) is an affirmation about a parameter of a population, which certifies, under certain condi- tions, that this parameter regarding the population is true; it indicates that it is not possible to verify that the tested model is suitable to represent the pop- ulation’s distribution. One of the meth- ods used for doing an adhesion test is the chi-square test (Conover, 1999; Costa Neto, 2005). The chi-square method of constructing a hypothesis test begins with establishing the level of significance (a). It can be argued that this procedure can lead to the rejection of the null hypothesis for a certain value of a and non-rejection to a lower value. Another way to proceed is to make the probability of significance or p-value (the p-value is the lowest level of significance a in which the null hypothesis may be rejected for a given observation). This study uses the contin- gency tables as the structure for the veri- fication of the tests. In tests of indepen- dence that use the contingency tables, the null hypothesis is rejected—that is, it does not support the independence between the variables tested, when the p-value is � a. Therefore, in this work,
Item Question Tested Variable
B2.3 Existence of outsourcing service management with outsourcing Culture of outsourcing in the company
B3.7a Evaluation of operational factors in project management: people trained Operational factor: people
B3.7b Evaluation of operational factors in project management: standard systems Operational factor: system
B3.7c Evaluation of operational factors in project management: process and Operational factor: process standard methods
B3.8 Alignment of the PMO in terms of powers of the organization Alignment of PMO competencies (central, essential, not central)
B3.10 Possibility of operation of the PMO by an external provider Possibility of PMO outsourced
B3.11 Perception of the degree of importance that the customer gives to the Perception of the customer about PMO operation of a company’s internal PMO to be internal competency
B4.3a Dominant stage of maturity for the three defined areas: project, program, portfolio Maturity stage—domain: project
B4.3b Dominant stage of maturity for the three defined areas: project, program, portfolio Maturity stage—domain: program
B4.3b Dominant stage of maturity for the three defined areas: project, program, portfolio Maturity stage—domain: portfolio
Table 1: List of research variables.
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the testing of hypotheses considers the following: the variables are independent when the p-value � a, here considered 0.05 (5%). The following outlines were set for the process of drawing up the design of the survey for this work.
Unit of Analysis and Survey Observation The unit of analysis used in this research is the organization. The obser- vation units are the respondents, pro- fessionals from a range of organiza- tions.
Universe, Population, and Survey Sample The universe of the research is com- posed of industrial or service organiza- tions. The population, a portion of the universe, is composed of industrial or service organizations located in Brazil. An industrial or service organization can be defined as a legal unit with an established name or company name that conducts capital investment and whose principal activity is industrial or service activities. The sampling frame of the research was identified by a deliberate process: this process involved studying a subgroup of the research population, the elements of which are easily identified, but whose total enumeration would be nearly impossible. Therefore, the research sample subset is composed of organi- zations with some degree of knowledge and use of project management tech- niques that are part of the industry or service sector in Brazil.
Research Design This survey had an intersectional research design in which the data were collected within a set period of time, establishing a sample that could be used to describe the larger population at the time.
Research Instrument The research instrument was a ques- tionnaire available on a website dedi- cated to the research process. The respondents were sent information about the research project by e-mail
with a link to the survey page. The ques- tionnaire was self-administered, which means that the respondents had no interaction with the investigator when they accessed the webpage and provid- ed their answers.
The questionnaire was divided into five sections: the survey introduction, a section on characteristics of the com- pany and the respondent, a section on firm competencies for the use of exter- nal resources (outsourcing), a section on project management within the company, and a section on the firm’s level of maturity in terms of project management. These section divisions were meant to provide structure to the survey, introduce the context of the research, and then request information about the respondent, respondent’s com- pany, and the organization of the indus- try. After that, there were the three more specific sections related to the objective of research—that is, understanding the process of formulation of skills, the organization of project management, and finally the stage of maturity in project management of the organization. In addition, the section divisions aimed to facilitate analysis and interpretation.
Findings A return rate of around 60% is usually considered adequate. Whereas 70% is considered a very good return rate in social sciences (Babbie, 1990), a moder- ately high return rate for surveys in marketing and human resources is con- sidered to lie in between 48.8% and 51% (Sivo, Saunders, Chang, & Jiang, 2006). These same authors indicate that according to research in several aca- demic publications, a return rate for online surveys below 40% is not uncommon and can be considered sat- isfactory. To calculate the return rate for the survey questionnaire, we used the following criteria: in addition to e-mails sent directly by the authors (169), 64 e-mails were forwarded by respondents, yielding a total of 233 answered e-mails.
Given that 78 valid responses were received, the assumed rate of return is
33.5%. Although this rate is well below the 60% level stipulated by Babbie (1990), it can be considered satisfactory according to Sivo et al. (2006). Responses recorded in the survey database were considered valid if they identified the respondent and the organization.
Of the 78 cases, 57 companies were identified by name, and the others had their names omitted by the respon- dents. Because the respondents were not required to provide the name of the respondent’s company, we chose to consider respondents from the same organization, even for those who have not been identified. Three organiza- tions were identified in more than one response, two appeared twice, and one appeared three times. On this basis, 78 responses are considered for analy- sis, and the conclusions of this study are based on those cases and their affiliated respondents and organizations.
The vast majority of the respon- dents who provided information about their employing organizations are affil- iated with national private companies (57.7%). The second most common type of firm was private foreign compa- nies (26.6%). The remaining companies are classified as public companies and “others,” with totals of 6.4% and 9.0%, respectively. The latter cases are indi- cated to be government bodies in the nonprofit and R&D companies.
Related to the sector, 62 companies (79.5%) are part of the service sector, whereas the remaining 16 companies (20.5%) belong to the industrial sector. There were no companies in the com- merce sector in the sample. Based on the Classificação Nacional de Atividades Econômicas (CNAE)2 of the Instituto Brasileiro de Geografia e Estatística (IBGE),3 the distribution of the compa- nies in the sample is shown in Figure 3.
Figure 4 shows the distribution of the sample in relation to the number
2 Classificação Nacional de Atividades Econômicas
(CNAE)—National Classification of Economic Activities 3The Instituto Brasileiro de Geografia e Estatística (IBGE)
is a governmental institute responsible for data research
in statistics and geography.
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of company employees. Companies with more than 500 employees repre- sent 50% of the sample, followed by companies with up to 50 employees (21%). The remaining sizes, ranging from 50 to 500 employees, represent approximately 30% of companies that participated in the survey.
Figure 5 shows the prevailing model of the firm’s organizational structure: 46% of companies are characterized as having a functional structure, the sec- ond and third most popular structures
are the projectized structure (29%) and the matrix structure (24%), respectively.
Figure 6 shows what position the respondents occupied at their firm when they responded to the survey questionnaire. It is important to note that all respondents occupy decision-making positions in the business: directors (14%), supervisors or coordinators (22%), and managers (42%) represent 78% of the survey respondents.
Figure 7 indicates the central and essential skills (competencies) of the
organizations as described by the respondents.
A significant share of the respon- dents (52%) clearly identified organiza- tional competencies, especially central and essential competencies (this classi- fication of organizational competen- cies was evidenced in the survey). On this basis, it is expected that these man- agers had the ability to clearly identify the positioning of firm PMOs regarding organizational competencies.
Figure 8 shows the respondents’ perceptions regarding the criteria used to select the organization’s projects. The order of priority was as follows: projects related to the firm strategy (33%); projects decided on by the board of directors (21%); projects that meet certain economic or financial criteria (21%); and projects that result in com- mercial advantages (14%). Other deci- sion-making criteria (12%) were com- plemented in a specific field; the responses indicate that the criteria for project selection include “customer desires (market)” and “government policies.”
It is interesting to note that “com- mercial advantage” represents one of the criteria of lower importance in the
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Figure 4: Characterization of the companies: Number of employees.
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selection of projects. Table 2 summa- rizes the results of tests of the hypothe- ses presented in the “Research Analysis Model” section, including the p-values for Questions A and B and their respec- tive hypotheses.
The first question in the survey (Question A) investigated the existence of a relationship between positioning of the PMO and the organizational com- petencies, assuming two hypotheses and three variables: B3.8—position of the PMO in the alignment of organiza- tional competencies; B4.3—maturity level with regard to project manage- ment (in the areas of projects, programs, and portfolios); and B3.7— degree of operational factors (teams, processes, and systems) related to proj- ect management.
Based on the hypothesis test for QA.H1, which tested the relationship between variables B3.8 and B4.3 in two areas (projects and programs), p-values � a � 0.05 were isolated; for the portfo- lio domain, a p-value � a was obtained. These results suggest rejection of the corresponding hypothesis; according to this sample, there is no relationship of dependency between the positioning of the PMO’s competencies and the level of maturity of project manage- ment in organizations.
Hypothesis test QA.H2 examined the relationship between variables B3.8 and B3.7, exploring three operational factors (teams, processes, and sys- tems). The test yielded p-values � a, leading us to reject this hypothesis. Based on this sample, it could not be proved that there is a relationship of dependency between the positioning of the PMO’s competencies and the degree of development of the opera- tional factors related to project man- agement in organizations.
The second question on the survey (Question B) was intended to investi- gate the circumstances under which an organization could use the services of third parties to operate its PMO, and was associated with two hypotheses and three variables: B3.10—the possibility
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Figure 5: Characterization of the companies: Organizational structure.
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Figure 6: Characterization of the companies: Organizational position of respondents.
12%
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Perceptions of Organizational Competencies
Figure 7: Perceptions of organizational competencies.
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of allowing PMO operations to be con- ducted by external suppliers; B2.3— the existence of any management services conducted for the firm by external suppliers; and B3.11—client
perceptions regarding the degree of importance of the PMO’s operations.
The hypothesis test QB.H1 tested the relationship between variables B2.3 and B3.10. The p-value (0.141), which is
higher than a � 0.05, indicates rejec- tion of this hypothesis. According to this research sample, it could not be proved that there is a relationship of dependency between the possibility of allowing PMO operations to be per- formed by external suppliers and the performance of management services by external suppliers, even if these practices are present in other areas of the organization.
Hypothesis test QB.H2 tested the relationship between variables B3.10 and B3.11. The p-value � 0.111, which is higher than a � 0.05, leads us to reject this hypothesis. Based on this sample, it could not be proved that there is a relationship of dependency between the possibility of allowing PMO operations to be performed by an external supplier and client percep- tions regarding the degree of impor- tance of PMO operations.
To better understand these research results, one can explore another perspective depicted in Figure 9. The positioning of PMO organizational competencies, as suggested by the frame of reference presented in Figure 2 (as proposed in the “Research Analysis Model” section), is an alternative source of internal and/or external firm resources. These resources can be determined based on client percep- tions (QB.H2) and on the internal cul- ture of the organization (QB.H1) regarding the use of external services.
Thus, despite the rejection of statis- tical hypothesis QB.H2, the survey results indicate a strong tendency that it is desirable to execute PMO compe- tencies using internal firm resources. In the same way, Hypothesis QB.H1 was statistically rejected, indicating that it is not possible to establish a positive rela- tionship between the level of services outsourced by the organization and the possibility of using this model for PMO operations. Whereas outsourcing is used in some areas of these organiza- tions, its use does not significantly correlate with similar decisions sur- rounding PMO operations.
21%
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10%
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Economics and Finance
Commercial Advantage
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Decision
Others
Project Selection Criteria
Figure 8: Project selection criteria in the companies.
Hypothesis Description p-value
Question A: What is the PMO position in terms of organizational competencies deployment?
QA.H1 There is a relationship between the degree of Project: maturity in project management with the 0.153 characterization of the PMO in the alignment of Program: organizational competencies. 0.286
Portfolio: 0.027
QA.H2 There is a relationship between the stage of Staff: operational factors (staff, processes, and 0.524 systems) and characterization of the PMO in Systems: the alignment of organizational competencies. 0.506
Processes: 0.837
Question B: In what circumstances can an organization adopt the outsourcing as a solution to implement and operate the PMO?
QB.H1 The decision to operate a PMO by an external 0.141 provider is positively related to the fact that businesses have a culture of outsourcing activities that are considered strategic.
QB.H2 The decision to operate a PMO by an external 0.111 provider is positively related to the perception of the customer that the PMO is aligned with organizational competencies.
Table 2: Hypotheses tests.
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Referring to the statement of the research problem, it is necessary to incorporate some additional considera- tions to deepen the analysis and the data interpretation. Organizations and researchers from an array of sectors (including traditional sectors, such as the construction sector, and those sec- tors with higher knowledge value, such as IT, telecommunications, and phar- maceuticals) are interested in appropri- ate models for implementing PMOs. Rad and Raghavan (2000) indicated that a well-designed and well-implemented PMO can be an antidote to high project failure rates. However, organizational objectives can make it difficult to secure the appropriate infrastructure for proj- ect management. This task is not trivial, given the range of possible directions for a PMO; a single person can be allo- cated to manage a single project, or an entire team can be dedicated to specific facilities and to the management of many projects, regardless of the organi- zation structure.
The concept of a PMO is still being developed and is a complex entity, which still lacks an identity because there is no clear consensus regarding the role of the PMO, as can be seen from a web-based survey conducted with 500 PMOs (43% from Canada; 26%
from the United States; 16% from Europe; 15% other) (Hobbs & Aubry, 2007), or from the results of forums including seven managers from large organizations, who underscored the dynamic nature of PMOs (Pellegrinelli & Garagna, 2009). Certainly, the theory in this realm is under construction, and therefore firms lack appropriate conceptual elements for PMO imple- mentation.
In the same vein as the difficulties encountered in implementing and operating PMOs is the challenge of identifying the appropriate balance of investments in processes, system solutions, IT, and professional team members, who must have knowledge of project management best practices. In addition, the time to market is also a consideration (Block & Frame, 2001, as cited in Englund et al., 2003). A complex structure of competencies is required that can allow firms to efficiently meet the demands of development, produc- tion, and delivery of goods and services to the market.
The decision to outsource involves the relationship between two agents: the company and the service provider. The decision will have a lower impact if the practice of outsourcing is established in a manufacturing sector. However,
because firms operate according to the customs and trends of the sector, major changes can occur in the sector and in related sectors (Harland, Knight, Lamming, & Walker, 2005). For these authors, one of the main factors that drives this change is the emergence of highly specialized companies that can provide outsourcing services in a par- ticular sector, allowing those receiving these services to focus on their core competencies. Business process out- sourcing is defined as the movement of business processes from internal to external provision. BPO is a strategic issue, not a technological one. Is BPO an inevitable force? How do we prepare for this change? Outsourcing is a set of activities with a high degree of com- plexity that requires extensive prepara- tion and training (Buening & Rclick, 2005). According to these authors, com- petitive forces require firms to seek more effective control of costs; this development is inevitable and irre- versible. No organizational structure or management team is prepared to maintain the progress of the outsourc- ing revolution. Under constant pres- sure from analysts to control organiza- tion head counts, the outsourcing of back-office activities has led managers to prepare themselves to hire subcon- tractors and outsource functions or entire processes.
This research has attempted to pro- mote understanding of the possible scenarios in which PMO competencies and other strategic functions can be operated through external resources and still be effectively incorporated with other organizational processes, quickly introducing state-of-the-art procedures to the firm through project management experts who are well versed in coordinating outsourcing services.
Contributions and Conclusions The results of this research project help us to better understand the question at hand. Having identified the research problem, followed by the literature
Figure 9: Diagram of the research hypotheses.
PMO Positioning
ExternalInternal Hypothesis QB.H2
“Clients’ Perceptions”
Hypothesis QB.H1
“Outsourcing Culture”
Hypothesis QA.H2
“Degree of Operational
Factors in PM”
Hypothesis QA.H1
“PM Maturity Level”
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review, we have expanded knowledge about the two main themes of this work: basic PMO competencies and the model by which organizational compe- tencies can be provided by third par- ties. These axes were the two issues of concern during this research project. It was a challenge to create the frame of reference for positioning of the PMO competencies and the particular vari- ables that were investigated in the sur- vey questionnaire. The aim was to ensure that the answers would allow an insight into the central themes of the study. In addition to developing the model, it was necessary to conduct field research using the survey method. This method was identified as the most appropriate given the limits associated with collecting data from samples in academic research. Of course, models and samples do not replace reality; rather, we use them to represent reality as faithfully as possible, as a photo- graph would, with all of its limitations. Ultimately, based on the results pre- sented in this article, the test of the pro- posed model was fundamental to address the research problem. Based on the objectives presented, the specific conclusions reached in this study are: • The results of the survey, which yield-
ed 78 valid responses, indicate that the positioning of PMO organization- al skills (competencies), as suggested by the frame of reference research model, are determined by internal firm resources and customer percep- tions.
• In the same way, still according to the research results, this study did not indicate a positive relationship between firm-level views and prac- tices related to external services and the possibility of using this model of outsourcing for PMO operations.
In addition to these specific conclu- sions, relevant issues from an academic and methodological point of view were also realized: • The article presented a conceptual
model that helped us to identify the
variables and questions employed in the research (a survey).
• The model has made a significant contribution to the discussion and the analysis of the results.
• The use of a statistical instrument, the chi-square test of contingency tables, was valuable for analyzing and testing our hypotheses.
The proposed model has certain limitations. It was difficult to identify all of the factors that influence the forma- tion of the organizational competen- cies task, which extend beyond the few elements identified in this study. Because the concept of PMOs and the practice of project management are still being defined, the greatest challenge is to present a generic model that is appli- cable across a range of industries and circumstances. However, despite these issues, we reaffirm the need to con- stantly develop the knowledge and resources related to the organizational skills in project management, and its structured way, through its PMO. The achievement of these competencies, which are desirable for an organiza- tion’s survival and growth, uses a bal- anced amount of external resources in order to devote its precious specialized resources to its core competencies, which is linked to the organization’s identity. In the past, outsourcing was mostly used for manufactured compo- nents and information systems. Nowadays, given the speed of technical changes in organizational roles, which require substantial investments in sys- tems, and support specialists, the use of outsourcing is constantly growing (Greaver, 1999). Outsourcing is becom- ing very sophisticated, and is even used for core functions like engineering, R&D, and marketing (Gottfredson et al., 2005). Thus, it is possible to notice the development and improvement of the- ories that contribute to the understand- ing and appropriate intervention in the reality of organizations, indicating pos- sible scenarios and ways to overcome present challenges.
Throughout the process of analysis and interpretation of results, the fol- lowing recommendations are suggest- ed for further research related to the theme of this research project: 1. The framework of the analysis model
and variables of the research could be reassessed and improved. The research should suggest other strate- gic approaches that inspire new research questions that could inves- tigate the problem of application of skills in project management coming from external resources.
2. Due to the diversity of structure models, composition, and levels of PMOs presented in the literature, there is the need for research focused on more defined extracts: for exam- ple, to investigate the use of out- sourcing services during the steps of implantation of PMOs by organiza- tions belonging to a sector with more acculturated outsourcing.
3. It was not the purpose of this research project to investigate processes and related skills for opera- ting the PMO, such as maintenance schedules and timesheets; produc- tion, distribution, and consolidation of project progress reports; filing documents; scope changes; and so forth. Future research could study the outline of these requirements and investigate outsourcing of each of these processes. Also, the suitable use of information technology and third-party systems in projects could be investigated, as many organiza- tions host their projects on third- party data centers.
4. Further questions include: How to investigate the sources of expertise able to provide outsourcing services for operation of the PMO? What would be the profile of organizations whose core competency is operating services for PMOs?
There are many such opportunities to go beyond the results achieved by this research project, and the academic com- munity concerned with the development
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of knowledge in project management should maintain its course of develop- ing new research projects. ■
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Vergilio Antonio Martins received a BS degree in electrical and electronic engineering from the Faculdade de Engenharia de Sorocaba—FACENS, São Paulo, Brazil, in 1983. He was awarded an MBA in business management from Escola de Pós-Graduação em Economia da Fundação Getúlio Vargas—FG/EPGE-RJ, in 2001. He is a project management specialist from CEGP— Fundação Carlos Vanzolini, and received an MS degree in Naval Architecture and Ocean Engineering from the Escola Politécnica— Universidade de São Paulo (POLI-USP), Brazil. From 2002 until the present, he has been work- ing as a partner-director of Teleco—Informação e Serviços em Telecomunicações Ltda and is responsible for strategic outsourcing services. He is also the owner of Kuai Tema Engenharia Ltda, a project management consulting company,
that was established in 2001. His research inter- ests are in the areas of project and operation management and organizational negotiation and decision analysis. He has authored or coau- thored eight technical and academic papers. He is currently a student in the PhD program of Naval Architecture and Ocean Engineering at the Escola Politécnica—Universidade de São Paulo (POLI-USP), Brazil.
Marcelo Ramos Martins has been an assistant professor of naval projects and naval architec- ture since 2000, in the Naval Architecture and Ocean Engineering Department at the University of São Paulo, Brazil. He received a naval architect BS degree in 1992, an MSc in ocean engineering in 1996, and received a PhD in 1999. All degrees were awarded by the University of São Paulo. He is the leader of R&D projects supported by PETROBRAS, TRANSPETRO (Petrobras Transport), FINEP, and FAPESP (official funds of research in Brazil). His research interests are concentrated in the areas of project and operation manage- ment, risk management, and system dynamics. He has authored approximately 100 papers pub- lished in journals or presented at conferences.
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