The Framework of Project Governance

Revision as of 23:59, 21 February 2018

Project governance is the establishment of organizational comprehension and circumstances under which delivering and organizing successful projects.^[1] Establishing project governance for all projects is an essential element in defining responsibilities and accountabilities in organizational control. Project governance provides a framework for consistent, robust and repeatable decision making. Hence, this offers a structured approach towards assuring businesses to conduct project activities, "business as usual" activities, as well as organizational changes.^[2] Project success is the primary objective of all projects; thus the systematic application of suitable methods and a stable relationship with project governance is of vital importance to reach an optimal project success.^[3] According to the research article "Project Governance – The Definition and Leadership Dilemma"; a majority of authors on project governance have a background in project management, where they attempt to create the project governance framework through a bottom-up approach. Due to a variety of projects in the industry, the range of stakeholders interest, different values and types, and complexity spectrum, the bottom-up strategy has its limitations when providing concise guidance to managers when executing and enforcing project governance.^[4] Based on these observations, the objective of this article sections into three parts; firstly the big idea of project governance will be described including the main pillars of project governance and its core principles. Secondly, three different approaches towards project governance will be identified along with the core principles. Lastly, the limitations concerning the different approach towards project governance will be analyzed.

The Big Idea

Introducing Project Governance

The governance of project management involves areas of corporate governance which mainly relate to project activities. Effective governance of project management ensures that the project portfolio of an organization is aligned to its objective, delivered efficiently and is sustainable. The governance of project management also supports the corporate board and project stakeholders receiving timely, relevant and reliable information.^[5] According to the PMBOK® guide, the oversight of project governance aligns with the organization's governance model, which includes the project life-cycle. The project governance framework provides structure, processes, decision-making models and tools for the project manager and team members to manage the project while supporting and controlling the project for successful delivery. Thus, project governance is an important element of any project, particularly in complex and risky projects. This method provides a comprehensive and consistent approach towards controlling the project and assuring its success by documenting, defining and communicating repeatable project activities. It includes a framework for making project decisions which encompass defining roles, responsibilities, and accountabilities for project success as well as determining the effectiveness of the project manager. Project governance defines and fits within the broader context of the portfolio, program, or organization sponsoring it but is separate from organizational management.^[6] Project governance involves stakeholders, as well as documented policies, procedures, and standards; responsibilities; and authorities. The project sponsor is also required in the project governance, which is the person who authorizes the project, makes executive decisions, solves problems and conflicts beyond the authority of the project manager. Additionally, the project steering committee or board, which provide senior level guidance to the project, are also involved in the project governance. Examples of the elements of a project governance framework include the following ^[6][7]:

• Project success and deliverable acceptance criteria;
• Special process to identify, escalate, and resolve issues that arise during the project;
• Established relationship between the project team, organizational groups, and external stakeholders;
• Project organizational chart which identifies project roles;
• Procedures and processes for communicating information;
• Project decision-making processes;
• Guidelines for the alignment of project governance and organizational strategy;
• Project life-cycle approach;
• Specific process for stage gate or phase reviews;
• Process special for review and approval of budget changes, scope, quality and schedule that are beyond the authority of the project manager;
• Process to align internal stakeholders with project process requirements.

It is the responsibility of the project manager and the project team to decide the appropriate method of executing the project within the constraints listed above, as well as the additional limitation of time and budget. While the project governance framework includes the activities in which the project team performs, the team is responsible for planning, executing, controlling, and closing the project. The project governance approach should be illustrated in the project management schedule. Included in the project governance framework are the decision regarding who will be involved, escalation procedure, what resources are required and the overall approach towards completing the project. Additionally, the consideration of whether more than one project phase will be involved and if so, what the life-cycle is for the project. ^[6]

The Pillars of Project Governance

Structure

The structure of project governance refers to the structure of the governance committee and the project steering committee. The broader governance environment includes various stakeholders and user groups. In some cases, there is a programmed board managing a group of related projects which form a portfolio decision-making group. These committees are required to establish policies and procedures in which decision rights and relationships are documented.^[2]

People

The effective structure of the governance committee depends on the people participating in the committees. The nature of the project is determined by the committee's membership. In regards to programmer and portfolio boards, different factors come into play when deciding the memberships which result in the decision of which organizational roles should be represented in the committee.^[2]

Information

The project manager escalates information that informs decision makers, the governance committee, which consists of regular reports on the project, issues, and risks. These key documents are the main elements that describe the project and the business case.^[2]

Project Governance Approaches

The journey which defines and applies project governance fuels the growing frustration of substantial capital project failure and the realization that project management at a technical and operational level should be complemented and supported at strategic and institutional management levels. The theoretical definition of project governance depends on the various authors with technical backgrounds, areas of practice or research fields. Three primary categories of project governance were identified according to the research article "Project Governance – The Definition and Leadership Dilemma." The first project category analysis single firm governance plan when choosing and managing internal projects. The second category examines multi-firm projects where various companies engage in contractual arrangements. The third category considers projects that involve multiple interconnected participants relying on the presence of one supreme hierarchical authority, usually the lead sponsor. These three categories of projects include a diverse collection of participants with opposing interests and agendas towards the management and outcome of the projects. In the second categorization of projects, project management in an institutional context could be viewed in three functional levels which are described in the table below. The categorization of these commonalities form the basis of the three project governance "school of thought" specifically the; single-firm school, multi-firm school, and the large capital school.

Single-Firm School

The application of project governance in this category is driven by projects in a single and autonomous company. Usually, practitioners in this category are IT companies and organizations involved with internal projects with minimal external client engagements. The levels of project governance are at a strategic and technical level due to its top-down nature. IT project management relates to selecting correct internal projects and that they are implemented according to company's standards. In the single-firm school, the project value is of secondary nature whereas large capital projects could reside under the category if projects are under the organization's single control, influence, and authority. Corporate governance could handle the project governance only with the sponsor as a separate corporate entity.

Multi-Firm School

The multi-firm school focuses on the relationship between different organizations engaging in single or multiple projects. One argument about the three critical project management perspectives, particularly socio-technical, organization, environment and project management perspectives is that it contains no formal framework for analyzing and managing the different interests between different participating organizations.

Large Capital School

From this approach, projects are often viewed as temporary organizations that need to define the appropriate governance framework where decisions can be made. The focus is to create an environment which is shielded from the external environment, political, and strategic influences, in which for project management activities can thrive. Decision making is the main focus instead of management and control. Therefore, project governance framework is considered to consist of an authoritative and organized structure within a sponsoring institution, including processes and rules, to ensure that projects meet their purpose. Many large capital projects including private, public and public-private partnership projects, have inherent complexities that lie in their international, cross-country borders of different contracting companies. These projects deal with challenges of governing an internal supply chain of multiple, multi-national organizations as well as the network of external actors. For large capital projects, the focus is on a higher level compared to the other approaches, which includes institutional issues that interact with the external and macro environment.

The Application & Framework

Core Principles

Principle 1

The first principle of effective project governance is the concept of a single point of project's accountability. In relation to a project success, it is required to have a single point of accountability. Without a clear understanding of who assumes accountability for the project's success, the project does not have a clear leadership. However, the person accountable for the project's success must hold a sufficient authority within the organization to assure that this person is empowered to make necessary decisions to reach a project success. Additionally, the right person needs to have the correct knowledge within the organization to be able to hold accountable.^[2]

Principle 2

To assure projects meet customer and stakeholders requirements, while simultaneously optimizing the value of money, the project owner needs to be a specialist that is not a stakeholder in the project. The ownership of the project should be separated from different stakeholder groups, for instance, the ownership asset or the ownership service. In some cases, organizations allocate the project owner role to the service owner or asset owner with the objective to meet the owner's fundamental needs which is the measure of a project success. This approach often results in wasteful scope inclusions and failure to achieve alternative stakeholder and customer requirements.^[2]

Principle 3

The important elements of project success are the following project activities; project decision making and stakeholder management. However, these activities are independent and need to be handled as such. When the separation is achieved, the blocked decision-making forum with multiple stakeholders is avoided by inhibiting its membership to only selected stakeholders that are central to the project success. Thus, ensuring the separation of stakeholder management and project decision making activities is of great importance for managing a successful project.^[2]

Principle 4

The main focus of this principle is to ensure separation of project governance and organizational governance structures. The establishment of project governance structures needs to be executed due to the fact that organizational structures do not provide the necessary framework to deliver a project. Projects require speed and flexibility in its decision making and the organizational structure does not support that. It is recognized that the organizational structure has valid requirements of reporting and stakeholder involvement. However, by adopting this principle it will reduce multi-layered decision making, time delays, and inefficiencies associated with it. This assures project decision making are executed in a timely manner. Thus, the established project governance framework for a project needs to be separated from the organizational structure.

Principle 5

A complementary principle regarding project governance also exist. The project business case is encouraged by realistic and relevant information which establishes a reliable basis for authorization decision-making. The board has the governance responsibility for project management in which roles, responsibilities and performance criteria are clearly defined. All projects have an approved schedule which consists of authorization points in which the business case is reviewed and approved.

Principle 6

When projects are multi-owned, additional principles exist. The definition of a multi-owned project is when the board shares ultimate control with other parties.

The Project Governance Model

The project governance model consists of six modules which establish the six key responsibilities. Each module outlines the objective of its key responsibility. Furthermore, a number of particularities shape the context of its key responsibility. Subsequently, for each key responsibility, a model is developed from theoretical foundations and best practices. ^[8]

System Management

Systemic thinking (the "software")

The importance of systemic or system-oriented thinking is well known around the world. According to Hans Ulrich, systemic thinking needs to become a cultural element of a development project, which he defines as the "Philosophy of how to approach the solution of the complex problem". Hans Ulrich identified five characteristics of systemic thinking which are listed here below:^[8]

1. Holistic thinking in open system;
2. Analytical and synthetical thinking;
3. Dynamic thinking in circled processes;
4. Thinking in structures and information processes;
5. Interdisciplinary thinking.^[8]

A system model (the "hardware")

Systemic thinking based on the foundation of a holistic system-oriented model, allows projects to be configured in accordance with the system-specific circumstances. Also, to be managed efficiently and effectively based on an enhanced system understanding. The six key areas of the system model are listed below:^[8]

1. Environmental spheres;
2. Stakeholders;
3. Issues of interaction;
4. Structuring forces;
5. Processes;
6. Modes of development.^[8]

Mission Management

Integrity Management

Extended stakeholder Management

Risk Management

Audit Management

Examples of Good & Bad Project Governance

Limitations & Benefits

Limitations

Benefits

Conclusion

Annotated Bibliography

Project Management Institute, Inc. (2013). A guide to the project management body of knowledge (PMBOK® Guide) - Fifth edition.: This guide provides relevant theories and concepts related to project management. Moreover, it provides general knowledge about project governance and the main elements of a project governance framework.

Patric S. Renz. Project Governance - Implementing Corporate Governance and Business Ethics in Nonprofit Organizations. Springer (2007)

References

1. ↑ Rod Beecham. (2011). Project Governance : The Essentials. IT Governance Ltd
2. ↑ ^{2.0 2.1 2.2 2.3 2.4 2.5 2.6} Xuan Liu and Hai Xie. (2014). Pillars and Principles of the Project Governance. Trans Tech Publications. http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.835.6802
3. ↑ Werner Robbert Titus DEENEN. (2007). Project governance - phases and life cycle. Universitaria Press Craiova. http://www.mnmk.ro/documents/2007/2007-24.pdf
4. ↑ Michiel C Bekker. (2015). Project Governance – The Definition and Leadership Dilemma. Procedia - Social and Behavioral Sciences. http://findit.dtu.dk/en/catalog/2279869142
5. ↑ Great Britain. Office of Government Commerce. (2009). Managing successful projects with PRINCE2. TSO.
6. ↑ ^{6.0 6.1 6.2} Project Management Institute, Inc. (2013). A guide to the project management body of knowledge (PMBOK® Guide) - Fifth edition. Project Management Institute, Inc
7. ↑ Joana Geraldi, Christian Thuesen, Josef Oehmen and Verena Stingl. (2017). How to DO projects. A Nordic flavour to managing projects. Danish Standards Foundation
8. ↑ ^{8.0 8.1 8.2 8.3 8.4} Patric S. Renz. Project Governance - Implementing Corporate Governance and Business Ethics in Nonprofit Organizations. Springer (2007).