Project Governance

Project governance refers to the management framework within which project decisions are made. Project governance is considered as a critical element of any project as \the accountabilities and responsibilities associated with an organization’s business as usual activities are laid down in their organizational governance arrangements, seldom does an equivalent framework exist to govern the development of its capital investments. The organization chart provides an overview of the responsibilities for any particular operational activity. Therefore it becomes important to develop a project governance policy; else no such chart is likely to exist for project development activity.

The primary aim of the project governance is to provide a decision making framework that is logical, robust and repeatable to govern an organization’s capital investments so that organization have a structured approach for conducting both its business as usual activities and its business change, or project, activities.

Pillars of Project Governance

The process of decision making framework in the process of development of project governance is supported by three pillars – Structure, People and Informtion

Structure

Structure refers to the governance committee structure. These includes,

1. Capital Expenditure Board that sanction resources (capital, human and other) to projects.
2. The portfolio committee who ensures that the right project are selected
3. Project Board or Project Steering Committee
4. Various stakeholder groups and user groups
5. Program , governing a group of related projects of which this is one, and possibly some form of portfolio decision making group.

Here, it is very important to lay down the decision rights of all these committees and how they relate in the policy and procedural documentation. Some of the other governing bodies include,

1. Functional Management: It is responsible for the tactical governance of project team members and their work and deliverables
2. Project team: It is responsible for operational governance of project resources and activities
3. Review and auditing: It functions as independent process governance and deliverable and information quality
4. Financial auditing: It is responsible for independent financial compliance auditing

People

The success of the committee structure depends majorly upon the people that are a part of the governance committees. The committee membership is thereby determined by the nature of the project including other factors that are also considered while determining the membership of program and portfolio boards which in turn helps in finding which organisational roles should be represented on the committee.

Information

The third pillar of project governance is the information that is used to inform decision makers consisting of regular project reports, issues and risks escalated by the Project Manager including certain key documents that describe the project.

Principles of Project Governance

Some of the core principles of Project governance frameworks are,

Principle 1: Ensure a single point of accountability for the success of the project

The fundamental project accountability is the accountability for the success of the project. Any project without a clear understanding of the accountability for its success holds no clear leadership. If there are no clear accountability for project success, then there would be no one person driving the solution of the difficult issues that beset all projects at some point. In case of no single point of accountability it slows down the project during the crucial project initiation phase due to absence of a responsible person taking important decisions necessary to place the project on a firm footing. The concept of a single point of accountability is the first principle of effective project governance.

The accountable person holds sufficient authority within the organisation so as to ensure they are empowered to make the decisions necessary for the project’s success. In case the wrong a person is selected, the project is no better placed than if no one was accountable for its success.

Principle 2: Project ownership independent of Asset ownership, Service ownership or other stakeholder group

Many a times organisations promote the allocation of the Project Owner role to the service owner or asset owner with the objective of providing more certainty that the project will meet these owner’s fundamental needs, which is considered as a critical project success measure. But the result of this approach involves wasteful scope inclusions and failure to achieve alternative stakeholder and customer requirements such as,

1. Benefit of the doubt goes to the stakeholder allocated with the Project Owner responsibility, skewing the project outcome;
2. Project Owner requirements receive less scrutiny, reducing innovation and reducing outcome efficiency;
3. Different skill sets surround Project ownership, Asset ownership and Service ownership placing sound project decision making and procedure at risk;
4. Operational needs always prevail, placing the project at risk of being neglected during such times;
5. Project contingencies are at risk of being allocated to additional scope for the stakeholder allocated project ownership.

Here, the only mechanism to ensure that the projects meet customer and stakeholder requirements, while optimising value for money, is by allocating Project ownership to specialist party, which otherwise would not be a stakeholder to the project.

Project Owner is engaged under clear terms which provides an outline of the organisations key result areas and the organisation’s view of the key project stakeholders. The organisations establishes a Governance of Projects Committee, which identifies the existence of projects and appoints project owners as early as possible in a project’s life, establishes Project Councils which form the basis of customer and stakeholder engagement, establishes the key result areas for a project consistent with the organisations values, and, oversees the performance of projects. All the parameters are detailed in a Project Governance Plan that remains in place for the life of the project. A project has many stakeholders and an effective project governance framework must address their needs.

Principle 3: Ensure separation of stakeholder management and project decision making activities

Often the decision making effectiveness of a committee can be thought of as being inversely proportional to its size but large committees fails to make timely decisions, those it does make are often not considered because of the particular group dynamics at play.

Since the project decision making forums grow in size, they tend to transform into stakeholder management groups. So when the numbers increase, the detailed understanding of each attendee of the critical project issues reduces. Many of those present attend not to make decisions but as a way of finding out what is happening on the project. Not only is there insufficient time for each person to make their point, but those with the most valid input must compete for time and influence with those with only a peripheral involvement in the project. Further not all present will have the same level of understanding of the issues and so time is wasted bringing everyone up to speed on the particular issues being discussed. Hence, to all intents and purposes, large project committees are constituted more as a stakeholder management forum than a project decision making forum. This is a major issue when the project is depending upon the committee to make timely decisions.

The stakeholder management mechanism that is put in place must adequately address the needs of all project stakeholders. It will need to capture their input and views and address their concerns to their satisfaction. This can be achieved in part by chairing of any key stakeholder groups by the chair of the Project Board. This ensures that stakeholders have the project owner (or SRO) to champion their issues and concerns within the Project Board.

Principle 4: Ensure separation of project governance and organisational governance structures

Project governance structures are built precisely because it is recognised that organisation structures do not provide the necessary framework to deliver a project. Projects require flexibility and speed of decision making and the hierarchical mechanisms associated with organisation charts do not enable this. The Project governance structures overcome this by drawing the key decision makers out of the organisation structure and placing them in a forum thereby avoiding the serial decision making process associated with hierarchies.

Subsequently, the project governance framework established for a project should remain separate from the organisation structure. Organisation must hold valid requirements in terms of reporting and stakeholder involvement. However a dedicated reporting mechanisms established by the project can address the former and the project governance framework must itself address the latter. The steering committee/project board is responsible for approving, reviewing progress, and delivering the project outcomes, and its intended benefits, therefore, they must have capacity to make decisions, which may commit resources and funding outside the original plan. This is the final principle of effective project governance. Adoption of this principle will minimise multi layered decision making and the time delays and inefficiencies associated with it. It will ensure a project decision making body empowered to make decisions in a timely manner.

Additional and complementary principles of governance

The board has overall responsibility for governance of project management. The roles, responsibilities and performance criteria for the governance of project management are clearly defined. Disciplined governance arrangements, supported by appropriate methods and controls are applied throughout the project life cycle. A coherent and supportive relationship is demonstrated between the overall business strategy and the project portfolio.

All projects have an approved plan containing authorisation points, at which the business case is reviewed and approved. Decisions made at authorisation points are recorded and communicated. Members of delegated authorisation bodies have sufficient representation, competence, authority and resources to enable them to make appropriate decisions. The project business case is supported by relevant and realistic information that provides a reliable basis for making authorisation decisions. The board or its delegated agents decide when independent scrutiny of projects and project management systems is required, and implement such scrutiny 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. 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.

Principles for multi-owned projects

The multi-owned projects can be defined as being a project where the board shares ultimate control with other parties. The principles included under multi-owned project,

1. Formally agreed governance arrangements
2. Single point of decision making for the project
3. Clear and unambiguous allocation of authority for representing the project in contacts with owners, stakeholders and third parties
4. Project business case should include agreed, and current, definitions of project objectives, the role of each owner, their incentives, inputs, authority and responsibility
5. Every owner should assure itself that the legal competence and obligations and internal governance arrangements of co-owners, are compatible with its acceptable standards of governance for the project
6. Project authorisation points and limiting constraints to give owners the necessary degree of control over the project
7. Agreed recognition and allocation or sharing of rewards and risks taking into account ability to influence the outcome and creating incentives to foster co-operative behaviour
8. Project leadership should exploit synergies arising from multi-ownership and should actively manage potential sources of conflict or inefficiency
9. Formal agreement that defines the process to be invoked and the consequences for assets and owners when a material change of ownership is considered
10. Reporting during both the project and the realisation of benefits should provide honest, timely, realistic and relevant data on progress, achievements, forecasts and risks to the extent required for good *governance by owners
11. Mechanism in place to invoke independent review or scrutiny when it is in the legitimate interests of one or more of the project owners.
12. Dispute resolution process agreed between owners that does not endanger the achievement of project objectives.

Roles of Project Governance

One of the key roles in project governance is that of the project sponsor. The project sponsor holds the three main areas of responsibility,

1. Board : For the board, the sponsor provides leadership on culture and values, owns the business case, keeps the project aligned with the organisation’s strategy and portfolio direction, governs project risk, works with other sponsors, focuses on realisation of benefits, recommends opportunities to optimise cost/benefits, ensures continuity of sponsorship, provides assurance and provides feedback and lessons learnt.
2. The project manager : For the project manager, the sponsor provides timely decisions, clarifies decision making framework, clarifies business priorities and strategy, communicates business issues, provides resources, engenders trust, manages relationships, and promotes ethical working.
3. Project stakeholders: For other project stakeholders, the project sponsor engages stakeholders, governs stakeholder communications, directs client relationship, directs governance of users, directs governance of suppliers and arbitrates between stakeholders.