How to setup a good project governance structure

Frank Smits

Initio Brussels

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Contents How to setup a good project governance structure ...... 1 Initio Brussels ...... 1 Article summary ...... 3 What is governance? ...... 3 Problem statement: lack of organisational knowledge on project governance ...... 4 Project governance ...... 4 Purpose ...... 4 Principles ...... 5 Roles ...... 7 The project manager ...... 8 Project stakeholders ...... 8 Steering Committee ...... 8 Tasks and elements of project governance ...... 9 Traditional governance versus Agile/Scrum governance ...... 10 Final Thoughts: Why Is Project Governance Critical to the Success of a Project? ...... 11 Author ...... 12 About Initio ...... 12 Contact ...... 13

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Article summary

This article describes project governance, its role within the organization and the principles, tasks and elements of good governance. It deals with the questions:

• What is governance? Why is it needed? • What are the principles of good governance? • How to assure good governance structures (roles, tasks and elements), can be easily setup, accepted and maintained? • Why is governance critical to project success? Finally, it looks at the traditional governance structure versus agile/scrum governance and describes some hands-on tips and tricks to implement good governance at every stage of your project. What is governance?

The Cambridge dictionary describes governance as ‘the way that organizations or countries are managed at the highest level, and the systems for doing this’, and also: ‘the activity of governing something’. Translating this into our world of business organisations and project- and/or program management, a more precise definition could be: ‘Establishment of policies, and continuous monitoring of their proper implementation, by the members of the governing body of an organization. It includes the mechanisms required to balance the powers of the members (with the associated accountability), and their primary duty of enhancing the prosperity and viability of the organization’.

Hence project governance is the management framework within which project decisions are made.

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Problem statement: lack of organisational knowledge on project governance

Project governance is a critical element of any project since typically an organisation usually has in place a ‘static’ governance model through a traditional organization chart but has seldom defined an equivalent ‘dynamic’ or temporary framework to govern the development of its ongoing projects. Typically, a company’s organization chart provides a good indication of who in the organization is responsible for any particular operational activity the organization conducts. But not all organisations have specifically developed a project governance policy or have thought about a proper governance structure upfront when starting up their projects.

Project governance

Purpose The purpose of project governance is to provide a decision-making framework that is logical, robust and repeatable to govern any type of project or program, and independent of the underlying usage of project methodology. In this way, an organization will have a structured approach for conducting both its business as usual activities and its business change, or project-activities.

Project governance will formalise the ‘what if’ scenarios in case of issue management (like budget restrictions, unforeseen project events, scope creep, ...) and decision management. It will resolve the uncertainties of ‘who can decide what’ in a temporary environment, and it should clarify the roles of all defined and designated stakeholders.

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Principles Good project governance is supported by a set of guiding principles:

Principle 1: Assure single point of accountability for the project success

Every project needs a clear leadership to assure success. The concept of a single point of accountability is the first principle of effective project governance. However, it is not enough to nominate someone to be accountable – the right person must be made accountable and endorsed/empowered by the senior management to hold sufficient authority within the organisation.

Principle 2: Separate project ownership from stakeholder(s)

It is imperative that the project lead defines a stakeholder map of all its stakeholders and a project specific governance structure for a formal decision process along the project lifecycle. The only proven mechanism to ensure that projects meet customer and stakeholder needs, while optimising value for money, is to allocate the project ownership to a specialist party, that otherwise would not be a stakeholder to the project. This is principle No. 2 of project governance.

The Project Owner is engaged under clear terms which outline the organisations’ key result areas and the organisations’ view of the key project stakeholders. Often, organisations establish 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. These parameters are commonly detailed in a Project Governance Plan which remains in place for the life of the project (and is distinct from a Project Management Plan which is more detailed and only comes into existence during the development of the project).

Projects may have many stakeholders and an effective project governance framework must address their needs. The next principle deals with the manner in which this should occur: Principle 3: Ensure separation of stakeholder management and project decision making activities. The decision-making effectiveness of a committee can be thought of as being inversely proportional to its size. Not only can large committees fail to make timely decisions, those who do are often ill- considered because of the particular group dynamics at play.

As project decision making forums grow in size, they tend to morph into stakeholder management groups. When numbers increase, the detailed understanding of each attendee of the critical project issues reduces. Many of the stakeholders tend to 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

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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.

There is no question that both activities, project decision making and stakeholder management, are essential to the success of the project. The issue is that they are two separate activities and need to be treated as such. This is the third principle of effective project governance. If this separation can be achieved, it will avoid clogging the decision-making forum with numerous stakeholders by constraining its membership to only those select stakeholders absolutely central to its success. There is always the concern that this solution will lead to a further problem if disgruntled stakeholders do not consider their needs are being met. Whatever 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 to champion their issues and concerns within the Project Board.

Principle 4: Ensure separation of project governance and organizational governance structure

Project governance structures are established precisely because it is recognized that organizational 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 traditional organization charts do not enable this. Project governance structures overcome this by drawing the key decision makers out of the organization structure and placing them in a forum thereby avoiding the serial decision-making process associated with hierarchies.

Consequently, the project governance framework established for a project should remain separate from the organization structure. It is recognized that the organization has valid requirements in terms of reporting and stakeholder involvement. However dedicated reporting mechanisms established by the project can address the former and the project governance framework must itself address the latter. What should be avoided is the situation where the decisions of the steering committee or project board are required to be ratified by one or more persons in the organization outside of that project decision making forum; either include these individuals as members of the project decision making body or fully empower the current steering committee/project board. 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.

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Roles

PROJECT SPONSOR A key role in project governance is that of the project sponsor. The project sponsor has three main areas of responsibility which are to the board, the project manager and the project stakeholders.

The project sponsor engages with stakeholders, governs stakeholder communications, directs client relationship, directs governance of users, directs governance of suppliers and arbitrates between stakeholders.

BOARD The board has overall responsibility for governance of project management but is usually not involved in detailed project follow up. It consists of senior managers/executive members and can be called upon in case of serious issues such as critical decision-making needs, additional budget allocations, urgent risk issues, contingency measures etc...

All projects have an approved plan containing authorization points, at which the business case is reviewed and approved. Decisions made at authorization points are recorded and communicated. Members of delegated authorization bodies need to 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 authorization decisions.

The board or its delegated agents decide when independent scrutiny of projects and project management systems is required and implement such scrutiny accordingly.

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.

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The project manager The project manager owns the day-to-day responsibility of the project. He manages the milestones, and information flows that inform decision makers: certain key documents that describe the project, foremost of which is the business case regular reports on the project issues and risks escalation The sponsor and the project manager align closely on timely decisions, clarify the decision-making framework, clarify business priorities and strategy, communicate on business issues, deal with provisioning of resources, engender trust, manage relationships, and promote ethical working within the project team. Project stakeholders Your project stakeholders are usually mid- to senior level management and hand-picked by the project sponsor.

A stakeholder is either an individual, group or organization who is impacted by the outcome of a project. They have an interest in the success of the project and can be within or outside the organization that is sponsoring the project. Stakeholders can have a positive or negative influence on the project and might have their own personal agendas to deal with, therefore stakeholder engagement is crucial. The first step is to identify all the relevant stakeholders. This seems like a daunting and asinine task but it is actually key. If one stakeholder is left out, this can derail the entire project and can have a detrimental impact. Steering Committee Project sponsor, project manager and project stakeholders usually come together at the Steering Committee - to be organized by the project manager on a regular basis:

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Tasks and elements of project governance Project governance will: • Outline the relationships between all internal and external groups involved in the project • Describe the proper flow of information regarding the project to all stakeholders • Ensure the appropriate review of issues encountered within each project • Ensure that required approvals and direction for the project is obtained at each appropriate stage of the project. Important specific elements of good project governance include: • A compelling business case, stating the objects of the project and specifying the in-scope and out-of- scope aspects • A mechanism to assess the compliance of the completed project to its original objectives • Identifying all stakeholders with an interest in the project • A defined method of communication to each stakeholder • A set of business-level requirements as agreed by all stakeholders • An agreed specification for the project deliverables • The appointment of a project manager • Clear assignment of project roles and responsibilities • A current, published project plan that spans all project stages from project initiation through development to the transition to operations. • A system of accurate upward status- and progress-reporting including time records. • A central document repository for the project • A centrally-held glossary of project terms • A process for the management and resolution of issues that arise during the project • A process for the recording and communication of risks identified during the project • A standard for quality review of the key governance documents and of the project deliverables.

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Traditional governance versus Agile/Scrum governance

Establishing project governance is not a simple task. Significant investment on this task needs to be made when embarking on a new project. It is often challenging to quantify what the benefits are when it comes to investing in the creation of the project governance framework. While the traditional governance tends to put in place a rather formal governance structure while Agile promotes in principle a more self-steering control of the project team members, it is in my opinion wise to use common sense in setting up a proper governance for your project, irrespective of the underlying methodology used. These are some recommendations to do so:

• Assure that all your defined governance bodies are actively involved and can add value to your project. Do not over-engineer your governance with entities that are only there for political reasons, but do not contribute value. • Setup your governance structure (steerco members, issue management, governance meeting agendas) as ‘lean’ as possible, and trust your project team in decision making abilities until proven otherwise (Agile principle) • Use common sense to manage governance agenda’s: it’s always difficult to have everyone aboard for every (governance) meeting – use the principle to confirm the meeting if at least half of the invitees have accepted. • Manage your stakeholders carefully – ultimately, they will make or break the project in case of red-zone issues. • Always take time to de-escalate team member issues, do not neglect or delay.

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Final Thoughts: Why Is Project Governance Critical to the Success of a Project?

Establishing a good project governance is not a simple task. Significant investment needs to be made when embarking on a new project. It is often challenging to quantify what the benefits are when it comes to investing in the creation of the project governance framework. The following are four key benefits of project governance: • Single point of accountability; • Outlines roles, responsibility and relationships among project stakeholders; • Issue management and resolution; and • Information dissemination and transparent communication. Project governance provides a single point of accountability. This mandates clarity and fosters consistency of decision making for the lifecycle of the project. By appointing one focal point of accountability, the individual's primary focus will be on delivering on the project's objectives and will be not be deterred for the duration of the project. This does not mean that there will be “one throat to choke,” but one person will be responsible for the direction and focus of the project and having multiple individuals accountable will not blur this. In addition, project governance defines and clearly articulates structured roles, responsibilities and accountabilities within the project, which also facilitates decision making. This is critical when the project manager has a deviation in scope, budget, time, resources, or quality, or when a risk has presented itself. Project governance defines whom these issues impact and how to deal with the impact. The governance framework will provide ’guidelines’ on how to deal with issues on the project. Not only does it define to whom the issues impact, but also it details mechanisms for how to deal with the issues. It ensures that the appropriate review on the issues is done and who are the key points of contact for addressing and approving any deviations in the project requirements. Project governance provides direction and defines decision-making procedures and metrics for validating impacts to the project. It also enables the project team to deliver on requirements and creates a forum for issue resolution to occur in a timely manner.

Finally, project governance provides a vehicle for information gathering and reporting to all stakeholders. This framework ensures that the communication plan is well defined, updated and executed. It also facilitates consistent, standardized and transparent reporting. This promotes nibble status updates on productivity as well as communicates and addresses stakeholder expectations.

Frank Smits, Initio [email protected]

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Author Frank Smits is a managing consultant at Initio Belgium, with over 20 years of hands-on project-, program management and business case management experience. He is also a certified Agile/Scrum product owner.

About Initio

Initio is a business consultancy firm specialized in the Financial Industry. Our offering is focused on business consultancy combined with project methodology in order to assist our clients on the whole project cycle.

We have offices in Brussels, Luxembourg & Geneva. Through close collaboration, we can react swiftly on a wide scope of services in order to meet client needs rapidly with the highest industry standards.

Initio is part of the French group Square Management.

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Contact

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Tel: +352 277 239 Tel: +32 (0)2 669 77 44 Tel: +41 (0) 22 591 79 21 Email: [email protected] Email: [email protected] Email: [email protected]

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