The planning cycle varies between businesses and the public sector. In the public sector, it tends to be tied to taxation timetables and government grants. As such, the main part of the planning cycle takes place between December and March, ready for implementation once the new financial year starts in April. In businesses, the new planning cycle often begins about 3 months before the company’s year end, so that as the business goes into its next year, investment plans are ready to be announced and implemented.
In addition to this, because of taxation rules and investment regulations, capital investment and revenue spend (CAPEX and OPEX) have to be clearly separated. So many organisations will have some capital projects, for example, investment in new buildings or infrastructure and some revenue projects, for example, acquisition of a new software package and the associated training. Most change management projects are revenue projects.
Initial planning phase
Information and financial estimates from the PMO are a vital input to the early stages of the planning cycle. The organisation needs to be able to answer a number of questions before it can start scheduling both projects and “business as usual” for the coming year. Strategic business managers will have a list of key projects that need to be undertaken. But they can’t schedule them until they know how much they’re going to cost and how the organisation can resource them.
Gathering these estimates is a key part of the PMO’s role in assisting strategic planning functions. The PMO will know the resource demands of the projects that are currently running because it collects timesheet information. It will also have up to date costs - the day rate for a contract project manager for example. It will know how many users are required and for how long, in order to carry out a typical user acceptance test. Crucially, it will also know how long current projects have to run. This allows it to predict when resources will become available for deployment on other projects.
Mid phase planning - capacity estimates and adjustments
When the PMO is able to supply this information, it allows the business planners to work out how much capacity the organisation will have in the coming year. This capacity is matched against urgent projects or workstreams that need to be prioritised. If there’s a gap, the organisation can then decide whether to defer some projects, take on contract staff, or ask HR to expand the workforce by recruiting more people.
Later phase planning - finance in place
Once the broad structure of work for the coming year has been agreed, the finance function can assess how much cash is needed, and when, to meet the investment objectives. In the public sector, council tax, grants, business rates and direct government spending are usually in place or formally agreed by March.
In businesses, the information on resourcing and broad estimates of costs for items such as software or building projects provided by the PMO are a vital tool in planning cash flow and borrowing.
During the financial year
In the private sector, shareholders or business owners will want the PMO to contribute to an assessment of the project benefits. This is often the job of the Head of the PMO who needs to pull together some metrics for the return the business can expect on its investment. In the public sector, projects are often undertaken on an “invest to save” basis, and the PMO should be able to supply information, for example, on the number of posts that will be saved once a new software application project is completed.
Businesses and organisations which understand the importance of the PMO to accurate planning very often take the process a step further, making the PMO responsible for much of the business planning, not just the project element.