How to setup a good project governance structure Frank Smits Initio Brussels 1 2 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 www.Initio.eu 3 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. www.Initio.eu 4 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. www.Initio.eu 5 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 www.Initio.eu 6 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