What is effective project governance?

For organisations implementing business change, good project governance protects investment, provides assurance of successful delivery of strategic intent and the realisation of financial and quantifiable benefits to the main investment board. It delegates control to the project manager by setting appropriate stage tolerances for cost, time, risk, benefits, scope and quality (criteria) to enable the effective day-to-day management of the project as well as the management of exception technique as a means to reduce the time burden on senior management in the project board roles. So project board members convene only where necessary to make a decision on an exception report (i.e. when stage tolerances are identified to be exceeded) or where a potential risk threat has eventuated leading to a request for change (i.e. those changes that may impact the agreed project baselines).

Good governance begins with a number of key structural and behavioural elements. They are:

Composition

Based on Managing Successful Projects with PRINCE2 guidance, the Organisation theme tells us to define and establish the project’s structure of accountability and responsibilities. At the direction level, the Project Executive, Senior User(s) and Senior Supplier(s) roles make up the project board. It does include the Project Manager role, particularly in any project decision making.

It is the project board who has the authority and accountability for the project within the instructions (initially contained in the project mandate) set by corporate (main investment board) or part of a programme board, where applicable. The spending authority specifies the arrangements for monitoring during planning, delivery and for post implementation evaluation as well as for gateway reviews and the contingency plans for risk management. This authority and accountability is demonstrated through continued investment decision making at key decision points, linked to stage release of funding, that must be independent of the project manager role.

Sizing

The project board represents all of the interested parties – for business, user and supplier interests in the corporate organisation. To enable investment decision making, it is good practice to keep the size of the project board as small and nimble as possible while still representing all business, user and supplier interests.

To avoid enlarging the project board, user or supplier groups could be used to maintain broad-ranging key stakeholder involvement in those projects that impact on a large user or supplier community. These groups discuss user or supplier issues and risks, and pass recommendations to the Senior User(s) or Senior Supplier(s) representatives on the project board. If a user or supplier group is involved, it is important to define at the outset in robust terms of reference who is authorised to represent its collective view and how this will operate that is collectively agreed upon.

Selecting the right people

During starting up a project process, it’s important that the right people, with the right skills (capabilities, knowledge and experience) are selected particularly for the three key project board member roles.

1. Project Executive – the ideal candidate should be derived from the business being changed and has a vested interest in establishing a compelling case for change, particularly as the vision for the future may not be the same as your stakeholders. They should have enough seniority and authority to provide leadership and take accountability for successful delivery but also low enough in the organisational hierarchy to have the time commitment to make decisions, when required.

2. Senior User – the ideal candidate will be derived from the business, the person who represents the end users and customers i.e. those who will use, specify the business requirements and monitor the product or service that the project has agreed to deliver in terms of quality, functionality and ease of use. They should be low enough in the organisational hierarchy to be familiar with operation of the intended solution but high enough to inform decision making by the project executive role.

3. Senior Supplier – the ideal candidate will be the vendor, supplier or prime contractor who is accountable for supplying the resources. They represent the interests of those designing, developing, facilitating, procuring and implementing the project’s specialist and technical products. From the perspective of the senior user, representing the customer interests, value consists of achieving the business objectives. Whereas the value of a product or service delivered by the senior supplier is created by two elements – utility (fitness for purpose) and warranty (fitness for use).

Accountabilities

1. Governance and management control

The project board is accountable for the internal controls used by projects and how the direction of travel is maintained throughout the lifecycle, with appropriate breakpoints that enable projects to be stopped or redirected. These governance controls are characterised by clear evidence of a guiding control group i.e. the project board, effective decision-making, the existence of management by stages, and regular review processes during the course of the project.

The focus of control will be on achieving the agreed organisational strategies and objectives within the tolerance and boundaries set by the project board and based on the broader business and technical requirements. Requests for change will be identified and evaluated, and decisions to deal with them undertaken using a structured risk management and change control process with appropriate impact assessments.

2. Assurance

Project board members are accountable for the aspects of project assurance aligned to their respective areas of concern i.e. business, user or supplier interests. If they have sufficient time availability, and the appropriate level of portfolio, programme and/or project management skills and knowledge, they may have the capability and confidence to conduct their own project assurance tasks, otherwise they may appoint separate individuals to carry these responsibilities. Project board members are however ultimately accountable for any project assurance findings, recommendations and actions aligned to their area of interest, even if they delegate responsibility to separate individuals.

Anyone appointed to a project assurance role reports to the project board member overseeing the relevant area of interest, and must be independent of the project manager at all times. The project board should not assign any project assurance roles to the project manager role otherwise the level of independence of what is being assured is negated. To provide a level of confidence and independence, the project manager role naturally cannot assure their own work or partake in the project board decision making process.

Culture

Good project governance starts with the understanding of what the organisation is supposed to achieve, then developing the right culture to achieve those goals the right way. Culture is the set of shared values and norms that characterise a particular organisation or group of people. A strong culture, in which project board members agree upon and care intensely about organisational values, can improve project performance by motivating the project team and key stakeholders and demonstrating the behaviours of transparency, collaboration and communication to enable effective investment decision making.

For a project board, these shared values includes inclusivity in decision making and keeping the interests of the user or customer at the forefront in the decision-making process. Its about balancing business, user and supplier interests, particularly those with the softest ‘voices’.

Warning signs

Poor implementation of portfolio, programme and project governance into an existing corporate governance structure is often attributed to project failure particularly as every project needs effective direction, management, control and communication to be successful. So what are some of the warning signs?

1. The project manager presenting the highlight report directly to the project board. This may result from:

The project board not setting appropriate tolerances or parameters for the project manager to effectively manage the project on a day-to-day basis without the need to seek project board direction.
The project board members not receiving the required information through the highlight report (or exception report, where applicable) to inform decision making.
The people selected for the project board members are either too high in the organisational hierarchy to make the time commitment to fully understand the status of the project and to scrutinise the project information, particularly to reveal any watermelon projects that require additional portfolio, programme and/or project office support.

2. The project board convening regularly each month. This may result from:

• Not having fully defined and documented roles and accountabilities or from a lack of understanding of their roles leading to the project board being involved in the day-to-day management of the project, rather than providing direction and management support.
• Being focused on discussions about the project direction rather than making decisions about how to proceed. It’s important to highlight that approval is not a substitute for consultation. If the project board is appropriately sized, the senior user and senior supplier representatives should be consulted beforehand by the project manager so the project executive can validate and make an inclusive decision.

Key success factors

Within the Portfolio, Programme and Project Management Maturity Model (P3M3), there are seven perspectives that assess and support effective delivery. These perspectives include – Organisational governance, Management control, Benefits management, Risk management, Stakeholder management, Finance management and Resource management.

In particular, organisational governance is about having the right initiatives running, while management control is about running them the right way. The former is focused on organisational controls rather than the internal controls for initiatives. Gated reviews linked to funding release are essential to maintain organisational control, maintaining alignment with the business or organisational plan, and conducting gated reviews at key points in the lifecycle. Because the organisational plan may change, even well-managed projects may need to be stopped for reasons outside of their control when continually balancing the portfolio and maintaining a sustainable budget position.

The key success factors that should be implemented when establishing effective project governance are:

1. Clearly defined roles, accountabilities and responsibilities

The project executive, senior user/s and senior supplier/s and delegated assurance roles of the project board should be clearly defined and understood. P3Os should specify all key project board decision points and accountabilities which should be integrated and documented into the wider organisational governance framework.

2. Clarity about governance

Ensure the P3O governance structures, processes, escalation routes, tolerance/control limits and role descriptions are clearly defined and included in the portfolio management framework.

3. Stage release of funding

Implement staged release of funding – linking continued funding for projects to the assessment of performance and continued strategic alignment. Incrementally releasing funds in line with the business change lifecycle helps maintain strategic alignment and minimises the risk of wasted expenditure. So funds can be better invested on pipeline initiatives that are better positioned to deliver strategic intent and financial and quantifiable benefits for the entire organisation.

In summary, good governance is about balancing control with progress whilst protecting investment and value. Its about enabling the delivery of organisational strategic intent and financial and quantifiable benefits within agreed parameters. The need to establish a clear and effective governance that is aligned to the project characteristics is critical to project success. Ensuring that the project board meets the needs of the project in its context is an initial and ongoing task that cannot be avoided, dealt with lightly or done once then then forgotten.

‘What is effective project governance?’ article by Milvio D., LinkedIn