Source: Article written by Ron Holohan, MBA PMP - an extract from the pm411 Project Management Podcast Episode 054: The complete PMO (part 1 of 2, which can be downloaded here.
PMO's were originally created to help support the technical function within an organization. However since that time, the function of a PMO has grown to include more business management. Ideally, a PMO within an organisation is situated to deal with both the project management environment as well as the business environment. On the project management side, there are the project executives, the project management, the technical members on the team and the PMO. On the business side, you have the business units and clients or customers that the PMO helps to represent.
Five Progressive stages of the PMO Competency Continuum:

There are five progressive and advancing stages of maturity for a PMO’s capability and responsibility.
Stage 1 of PMO maturity is The Project Office. This is a essentially the project manager and project team working as a project office. This project office provides its own oversight of project.
The Stage 2 PMO, called The Basic PMO, contains process control in addition to project oversight. The Basic PMO provides a full-cycle and repeatable process that can be used across all projects in an organization. The Basic PMO would most likely be led by a program manager and might have several project managers and projects involved.
The Stage 3 PMO, called The Standard PMO, is the level that most organizations need and want to have. This level includes project control, oversight, as well as support. The Standard PMO creates the infrastructure and capabilities to support a cohesive project management environment. The Standard PMO has multiple projects, project managers, and perhaps even program managers under its control. The head of the Standard PMO is usually a program director or senior program manager.
Stage 4 is The Advanced PMO where business processes are truly integrated with project management processes. This stage includes dedicated staff, including a PMO director that oversees the technical and business aspects of the project management environment.
The final stage, Stage 5, is The Center of Excellence. Here is where you manage continuous improvement and project management process implementation across the organization for the purpose of achieving strategic organizational goals.
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