Governance
Abstract
This chapter focuses on governance applied to once-off activities in any organisation. It lists thirteen widely recognised principles. Application of these principles to portfolios, programmes, and individual projects is examined under four components: portfolio direction, project sponsorship, project management capability, and disclosure and reporting. In each of these sections guidance is provided. Additional chapter sections cover ethics and governance evidence. The conclusion stresses that the application of the principles should be conditional upon the specific requirements of an organization, rather than adoption of a standard governance model. Caution is advised on using governance scoring schemes. Reference is made to key publications from the Association for Project Management.
Keywords
Governance; portfolio; programme; project; principle; sponsorship; capability; disclosure; ethics
Chapter Outline
Governance of Project Management (GoPM)
Organizations require their objectives set and the determination of the means of attaining these objectives and of monitoring performance. Governance provides the necessary structure for this. It is not the product of any one body but involves relationships between interested parties.
For corporations these interested parties include the board, management, and shareholders as well as the legislature and other stakeholders. For public sector organizations, social enterprises, and other non-corporate organizations the parties providing governance will differ.
Governance applies to all the ongoing and once-off activities of an organization. The delivery of governance requires such activities as annual general meetings, board meetings, benchmarking, standard procedures, assurance, marketing, press releases, and core documents control such as memorandum of understanding, adopted policies and delegated authority schedules, and management reports.
Once-off activities are best managed through the discipline of project management, hence the importance to all organizations of governance of their project management. Governance of project management could well be defined as the framework of the overall strategic requirements of the sponsoring organisation within which projects are managed. The governance of any one particular project is therefore a specific subset of the governance of all the project management in an organisation.
To assist directors and equivalents to ensure that good governance applies to project management throughout their enterprise 13 principles can be identified. These are published by the APM in ‘Directing Change, A Guide to Governance of Project Management’. With the kind permission of APM, these principles are repeated below:
• The Board of Directors has the overall responsibility for the governance of project management.
• The organisation differentiates between projects and non-project-based activities.
• Roles and responsibilities for the governance of project management are defined clearly. (For a particular project this should be enshrined in the project management plan.)
• Disciplined governance arrangements, supported by appropriate cultures, methods, resources, and controls are applied throughout the project life cycle. Every project has a sponsor. (From conception to termination.)
• There is a demonstrably coherent and supporting relationship between the project portfolio and the business strategy and policies; for example, ethics and sustainability.
• All projects have an approval plan containing authorisation points at which the business case, inclusive of cost, benefit, and risk is reviewed. Decisions made at authorisation points are recorded and communicated. (These review points can be shown on the project schedule or bar chart.)
• Members of delegated authorization bodies have sufficient representation, competence, authority, and resources to enable them to make appropriate decisions. (These are normally covered in the terms of reference and responsibilities of the individuals and committees.)
• Project business cases are supported by relevant and realistic information that provides a reliable basis for making authorisation decisions. (This is the basis of producing and maintaining the business case.)
• The board or its delegated agents decide when independent scrutiny of projects or project management systems is required and implement such assurance accordingly.
• There are clearly defined criteria for reporting project status and for the escalation of risks and issues to the levels required by the organisation. (These are set out in the project management plan.)
• The organisation fosters a culture of improvement and of frank internal disclosure of project information.
• Project stakeholders are engaged at a level that is commensurate with their importance to the organisation and in a manner that fosters trust.
• Projects are closed when they are no longer justified as part of the organisation’s portfolio.
• The main components of portfolio, programme, and project management that need to be examined to ensure compliance with the principles of good governance are:
Portfolio Direction
It must be confirmed that:
• The project portfolio and its constituent parts are aligned with the business objectives of the organization, which cover profitability, reputation, customer service, sustainability, security, and growth and the impact of the various projects is acceptable to the ongoing operations of the organization.
• The financial controls of the portfolios and individual projects are compatible with those of the organisation. In addition, the planning, expenditure, and review procedures are aligned to the organisation’s procedures.
• The organisation discriminates effectively between activities requiring project management and other activities that should be managed as non-project operations. Priorities of projects in the portfolio are periodically reviewed to ensure that the mix meets the corporate strategy.
• Project risks are regularly assessed to determine their combined impact on the organisation as a whole.
• The organisation’s capacity is consistent with the project portfolio.
• The sponsoring organisation and external stakeholders such as suppliers, customers, backers, finance providers, and regulators must be sufficiently engaged and involved to ensure a sustainable development of the organisation as well as being aligned with project successes.
Project Sponsorship
To ensure that governance is applied it is essential that:
• All projects have competent sponsors who represent the whole organisation and who can make clear and timely decisions.
• Sponsors devote sufficient time to their projects from concept to closeout and final handover.
• Sponsors keep up to date with the progress and general management of the project by convening regular meetings with their project managers and are prepared to seek independent advice to assist them in the appraisal process.
• Sponsors ensure that sufficient resources (financial, material, and human) are available and appropriate skilled personnel are supplied when required.
• Sponsors maintain the business case (which they own) and accept accountability for the realisation of the specified benefits.
Project Management Capability
The success of projects depends on the experience and leadership qualities of the managers, the skills of team members, the timely availability of the necessary resources, and the processes and procedures employed. It is necessary to ensure therefore that:
• The business case fully reflects the strategic objectives of the organization.
• Projects have clear objectives, scope definitions, envisaged business outcomes, and critical success criteria that will enable realistic decisions to be taken.
• The organisation’s project management processes, procedures, and management tools are appropriate for the project in question.
• The project manager, team members, and operatives are competent, aware of their roles and responsibilities, and motivated to improve the performance and delivery of the project.
• The organisation develops and maintains a dynamic stakeholder management procedure with particular emphasis on communications to, from, and between stakeholders.
• The suppliers, contractors, and providers of services (internal and external) have competent staff and sufficient resources to meet the project’s requirements in terms of time, cost, and performance.
• Establish procedures for change and risk management and ensure that they are adhered to and implemented.
• Allowances have been made for contingencies that are controlled by authorised persons.
Disclosure and Reporting
Project management information flows up, down, and across as well as to and from organisations. Regular, timely, and reliable disclosure and reporting is an essential part of good project management. Checks should be carried out to ensure that the reporting procedures comply with company policies. Top-level reports on any project should cover:
Periodic appraisal is recommended by peer and/or external groups of the complexity and value of information flows including reports to ensure that the minimum effort is expended to produce only the necessary information.
The culture of the organisation should encourage honest and open reports. It should not deter whistle-blowers.
Ethics
Organisations should have a policy on ethics. As noted under Portfolio Direction above, governance of project management requires that project management complies with organisational policies including that on ethics. It is the duty of project management practitioners to be fully informed about their organisation’s and their profession’s policies on ethics.
A policy of openness and disclosure together with a basic trait of honesty will ensure that attempts of bribery and corrupt practices are exposed and firmly rejected. There are however contexts where such standards just do not exist. Indeed, it may be difficult if not impossible to carry out any business operations in certain countries unless ‘on-costs’, often euphemistically called mobilisation costs, introduction fees, facilitation payments, etc., are added to the contract sum. Such allowances are often added to the fees paid to the agent representing the organisation in that country and that is the end of the matter as far as the company is concerned. Care must be taken in all cases to comply, where applicable, with the requirements of the UK Bribery Act 2010 or where applicable the U.S. Foreign Corruption Practices Act 1977.
On a more personal level, there is always the dilemma of how far one can go when giving or receiving seasonal gifts, entertaining clients, or being entertained by suppliers. Perhaps the clearest answer to this question was given by a senior manager of a construction company to a project manager who asked for clarification as to what gifts are acceptable or permissible. The advice given was: ‘You can accept anything, provided you can carry it home in your stomach’.
Evidence
With the increased focus on governance, second and third parties such as clients, investors, suppliers, and regulators are looking for evidence of good governance. Some have developed scoring systems for the maturity of governance, inclusive of the governance of change. Difficulties must be recognised in this external scoring.
Governance arrangements for an organisation should be tailored to its own needs. It is unlikely that any standard scheme of measurement will usefully apply across organizations at different stages of development or in differing sectors and cultures. Difficulties arising in applying standard governance models include allowing for the relatively common situation where one organization does not have sole control of one or more projects. Also, the particular governance issues arising in the public sector require different treatment to that in the private sector.
The evidence is mixed as to whether organizations that score higher on objective governance schemes perform better for stakeholders. Some sectoral studies such as in the Oil and Gas sector show a positive relationship, but some wider studies do not. Certainly there is anecdotal evidence from highly successful technology companies such as Apple and Google that the best judges of appropriate governance are their own leaders rather than third-party standard setters.
The quality of applied governance is also difficult to measure. The reality is that dynamic governance decisions can be made under stress and subject to group dynamics that are not recorded. Assurance schemes too often rely entirely on verifiable documented evidence. These capture only a part of the significant reality, such as in the case of Royal Bank of Scotland in UK in 2007 where excellence in reported governance compliance preceded a major crisis, which was subsequently attributed to ‘a real failure in corporate governance’.
Conclusion
Too many projects fail not because of poor project management, but because the project’s governance regime and application is poorly developed, not integrated into the wider governance of the organisation, and therefore damaging. Implementing the principles above through the four components described with the proper ethical approach will go a long way to ensure the reliable delivery of projects contributing to organisational success. A conditional questioning approach is preferred to any one standard. More specific guidance is available in the APM publications Directing Change, Co-Directing Change and Sponsoring Change.