Corporate/Organizational Governance

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This subject covers the creation and implementation of the organizational objectives, policies, practices and systems that are responsible for ensuring organizational resources are utilized effectively and the work of the organization is aligned with its strategy and objectives.

Topics included in Corporate/Organizational Governance:

- The Function of Governance and Governing
- Governance and Stakeholders
- Governance systems
- Governing the organization's Projects, Programs, & Portfolios
- Governance failure
- Differentiating Governance and Management
- Useful External Web-links & Resources.

Other related sections of the PMKI:

- Corporate/Organizational Management
- The Origins and Development of Governance


The Function of Governance and Governing

The structuring and oversight of the organizations governance systems and capabilities.

The purpose of governance is to 'to align as nearly as possible the interests of individuals, organizations and society', this is a much higher order of objective than merely enforcing processes and procedures. The concepts outlined in these papers are consistent with:
-  ISO 21505 Project, programme and portfolio management - Guidance on governance, and
-  ISO/IEC 38500:2010 Corporate governance of information technology.
The origins and development of governance is covered in our history section - see more.

WP: Organizational Governance. The art of good governance is having sufficient processes in place to prevent malfeasance, whilst achieving the strategic objectives of the organization.

Blg: Defining Governance. What the Words Mean. Constructing a useful definition of governance.

Blg: Understanding Governance. Discussion of various governance frameworks and their purpose.

WP: The Functions of Governance. The Six Functions of Governance that define governance and differentiate governance from management.

Blg: Governance processes and terminology. This blog provides a set of referenced definitions for the different terms and suggest a hierarchy for use by a governing body.

Art: The origins of governance. History of the development of the concept of organizational governance.

     

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Governance and Stakeholders

The link between governance and stakeholders

Art: Governance and Stakeholders. The application of Stakeholder Theory to governance.

Art: Stakeholder engagement by any other name. The relationship between stakeholders, CSR, the TBL, sustainability, ISO 26000, GRIG4 reporting; and what this means for you.

Prs: Portfolio governance and risk – it’s all about the stakeholder. The art of portfolio management is to balance the risks and rewards of investing in projects, whilst keeping the overall risk exposure at a level that is acceptable to organization's the key stakeholders.

Art: Stakeholders expect good governance. The rise of stakeholder activism is increasingly affecting the way organizations of all types are governed and managed, but many people confuse ‘good management’ with governance. Governance is firstly focused on creating the environment in which ‘good management’ can flourish and then on ensuring the organization's management is ‘good’.

See also the PMKI page on: Stakeholder engagement and management

       

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Governance systems

The interaction between project management systems and the organizations overall management and governance systems.

WP: Governance & Management Systems. The symbiotic relationship between governance systems and management system in the creation of value from PPP.

Blg: Governance from the perspective of Systems Theory. A view on how governance, management and project management systems interact within an organisation.

Blg: Be careful what you govern for! The governance challenge is working out a way to implement efficient systems that also encourage an appropriate degree of innovation and experimentation.

          

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Governing the organization's Projects, Programs and Portfolios

Governance focuses on the structuring and oversight of the organization's capability to manage the delivery of its portfolio of projects and programs to create value.

The strategic management of projects, organizational capabilities and control boards are included in Corporate/Organizational Management.

PMOs and support offices have their own page.  

Corporate GovernanceProject governance is a sub-set of the overall governance processes of the organization focused on defining as accurately as possible 'what' the project has to deliver, and then ensuring resources and systems are in place to achieve a successful outcome! It goes without saying the 'what' should be aligned with and contribute to the strategic objectives of the organization. Projects are typically the catalysts that generate the new income streams, greater efficiencies and business changes, which underpin changes in overall corporate performance. These changes being the basis for the forecast future incomes, expenditures and profitability that need to be disclosed to the market on an ongoing and ‘prompt’ basis.

The legal liability of corporate managers and Directors the world over is being tightened. At the same time shareholders and other corporate stakeholders are becoming less tolerant of errors of judgement and loss of control. These changes have a common purpose; to increase the predictability of an organizations future financial performance and to keep the markets informed of changes as they occur. The challenge now facing every organization that relies on projects to instigate change and grow value is to move from an ad hoc system of ‘doing a project’ to one that is integrated, robust, repeatable and auditable. This transition requires the active involvement and understanding of senior management, supported by properly trained and qualified project personnel who have the authority and capability to implement best practice processes and systems.

The two key questions that need to be answered before initiating a project are 'can we do it?' and 'should we do it?'. If there is any doubt about the first question a feasibility study is required, WP1027 outlines the processes involved in undertaking a Feasibility Study. The question 'should we do it' is answered by the Business Case

WP: PPP Governance (Project Program Portfolio). You govern the organization that undertakes projects as a part of its business but the governance process needs to be capable of governing PPP. This aspect of governance is:

Prs : Stepping up to governance. A preview of ISO 21505:2017 Project, programme and portfolio management — Guidance on governance, and its role in defining the governance of project management.

PP: The Management of Project Management : A conceptual framework for project governance. For an organization to create optimal value from its investment in projects there must be a clear link between the outputs created by the projects and the requirements of the organization's business strategy. This means that organizations that have a structure in place for aligning the project deliverables with their organizational goals will be better placed to realize their investment in projects, and achieve the value defined by their business strategies. This paper examines existing research, ideas and concepts of project governance and enterprise project management, and offers a framework to build on current theory development and practice. Synthesizing existing literature of project/program management, governance and portfolio management, this paper proposes four key elements to improve the performance of projects and hence create value for organizations. These four elements are:

  • Portfolio management: focused on selecting the right projects and programs to support the organization's strategy, and terminating ones that no longer contribute to the business success of the organization
  • Project sponsorship: providing the direct link between the executive and the project or program manager, focused on the whole project lifecycle
  • Project Management Office (PMO): providing oversight and strategic reporting capabilities; projects and program support: the effective support and management of projects and programs are the measures of an effective governance system.
The purpose of the framework described in this paper is to provide guidance to organizations in the development of effective project governance to optimize the management of projects. 

   -  Download the academic paper published in the IJPM
   -  Download the presentation

Art: Governing for Success - Helping deliver successful projects. Suggestions on the journey organizations need to undertake to evolve and mature their management processes to achieve consistent success in the delivery of their projects and programs.

Art: Improving the Governance of Projects, Programs and Portfolios. Capabilities any governing body can implement to enhance it ability to govern PPP effectively.

Prs : Governing to Create Value: An organizational perspective on effective project management. Governance is more than compliance. The purpose of covering any organization is provide effective stewardship of the resources being governed to provide sustainable benefits for the relevant stakeholders. This presentation:
-  Defines governance and the stakeholders the governing body serves with a view to identifying the
    broader measure of value essential for effective governance.
-  Differentiates management from governance; governance is a management oversight process that
    provides direction and oversight to the management processes that deliver the value. The role of
    governance is to ensure both governance and management systems are working effectively to
    generate value.
-  Define the key functions of governance, and the governing body, in creating the ethical and cultural
   framework needed to generate sustainable value for the organization.
-  Define the role of the governing body in requiring the organization's management to develop the
    capability to undertake projects and programs efficiently, in support of the organization's strategic
    objectives.
-  Define the role of project, program and portfolio management in creating the changes necessary
    to generate future value for the organizations stakeholders; plus the key roles of executive and
    operational management on the 'value chain'.
-  Finally, look at the role of project controls professionals at each stage in the value generation chain
   from innovation and strategy through to benefits realization and value creation identifying the
   governance processes and the management actions they support, initiate and oversee.

Prs : Governing for success, Crossrail - PPT - Construction CPM 2019. This presentation applies the principles outlined above to the London Crossrail debacle as at 2019. The eventual full opening of Crossrail (renamed to the Elizabeth Line) was delayed to 2022.

Prs: Governing and Leading Projects using Earned Value Management (EVM). Good management and good governance requires good information. When implemented effectively EVM is a robust, practical system focused on assessing and supporting the managers of a project. Based on the framework in ISO 21508, this presentation provides an overview of the 11 steps needed to implement EVM effectively.

Art: Lessons for PMO managers from the CBA scandal. The CBA financial scandal of 2018/19 was a classic example of the effect of setting the wrong performance targets. If your measurement systems focus on the wrong things, you will get exactly what you asked for!

Prs: Governing Agile – the changing role of project controls in an ‘agile’ environment. The challenges of governing and managing an 'agile' environment are significant. If, you cannot manage things you cannot control, and you cannot control things you cannot measure but how can these tried and tested mantras be applied to an inherently unpredictable process such as agile? It is no longer acceptable for ‘agile anarchists’ to advocate ‘trust us, we are all above average and because we are all above average you will get great outcomes’ (their limited mathematics is frightening enough). Similarly the ‘water-scrum-fall’ approach of trying to fit agile/scrum development inside a predetermined plan leading to the inevitable fall failure has been discredited by major disasters in the UK.

A better approach is needed to eliminate the biggest risk to agile as a project delivery strategy, the increasing number of high profile failures. This requires the development of effective governance and controls systems that actively support successful agile implementations – the focus of this presentation. Governance is the system by which organizations are directed and controlled. The governance structure specifies the distribution of rights and responsibilities among different participants in the organization, and spells out the rules and procedures for making decisions. It also provides the structure through which the organization's objectives are set, and the means of attaining those objectives and monitoring performance. Project governance is a key subset of organizational governance and project controls provide the means by which project performance is monitored and controlled. These concepts are relatively easy to implement when the project’s scope, cost and time objectives are baselined and variations are managed through a structured change control process – the realm of traditional project management. They become more important, but also much harder to implement when the project is a journey of exploration being developed iteratively – the realm of agile.

A new paradigm is needed to allow effective governance oversight within the evolving agile framework. This paper will describe situations where Agile offers a clear advantage and then describe how the overall governance structure and project controls systems need to adapt to provide valuable support to the Agile processes whilst still generating accurate information for use at the higher levels of management and in the organization's governance systems. This presentation suggests an appropriate framework for the overall governance of agile projects (including the role of a steering committee) and outline the controls framework needed to support both the management and the governance of the project.

Prs: Portfolio governance and risk – it’s all about the stakeholder. The art of portfolio management is to balance the risks and rewards of investing in projects, whilst keeping the overall risk exposure at a level that is acceptable to organization's the key stakeholders.

Art: ‘Not knowing’ is no longer an option. Effective governance and management requires timely access to ACCURATE information.  Ensuring the information used to manage the organization is ACCURATE is an core governance responsibility.

DP: Conditions for project success. Research by the APM confirms that the environment in which the projects operate are at the heart of improving project outcomes.

            

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Governance failure

The consequences of poor governance is poor management leading to loss of value.

Blg: Poor Governance creates complexity. Uncertainty is not the same as ambiguity – failing to manage both of these factors increases complexity.

Blg: The Capital Crime. Consequences of executive management failing to effectively ‘manage the management’ of projects and programs.

Blg: Project or Management Failures? Defining how many project failures are caused by project management shortcomings and how many are set up to fail by the organizations management.

Art: Why are so many projects set up to fail? Allowing management to set unrealistic targets is at its root a governance failure.

Blg: Is your steering committee costing $5000 per hour? Effective steering committees work with the project manager and sponsor to help the project successfully navigate the organizational stakeholder environment and resist the urge to interfere in the actual running of the project or program!

              

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Differentiating Governance and Management

Governance and management are different concepts, the role of governance is to set 'the rules' and objectives for an organization or entity, the role of management is to work within the 'rules' to achieve the objectives. The functions of governance interact with the functions of management; the key difference being governance sets the rules and objectives, management works within the rules to achieve the objectives.

In many jurisdictions governance is a legal responsibility of the organization's Officers. Precisely who is an 'officer' has been clarified by the Australian High Court in Australian Securities and Investments Commission v King [2020] HCA 4.

People who are 'officers' of a corporation and legally responsible for its governance include: the Secretary of the Corporation and its Directors, people who make, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation, and people who have the capacity to affect significantly the corporation's financial standing. the key finding in ASIC v King is that the function of being an officer is defined by reference to the facts of the relationship between an individual and the corporation in relation to managing or directing the affairs of the corporation.

Blg: Does organizational governance exist? Yes! Governance sets the objectives and rules for the organization, management works within the rules to achieve the objectives.

Blg: Management -v- Governance. The governing body (typically Directors) directs and governs; managers manage at various levels.

Blg: Governance -v- Management: A Functional Perspective. The functional differences between the roles of governance and management. Art : Stakeholders expect good governance. Stakeholders are becoming less tolerant of governance failures leading to bad management, but confuse governance and management.

Blg: PMI’s Practice Guide for the Governance of Portfolios, Programs, and Projects. Misses the 'boat' by failing to differentiate the functions of management and governance - this post highlights the differences and the shortcomings in the Practice Guide.

        

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Useful External Web-links & Resources

ISO 21505:2017 Project, programme and portfolio management -- Guidance on governance Also available as AS ISO 21505 from Standards Australia.

APM GoPM Publication (UK) - Directing Change, a guide to governance of project management
- Association for Project Management - https://www.apm.org.uk/ 
- Download the booklet: Directing Change - A guide to governance of project management

OECD Principles of Corporate Governance: http://www.oecd.org/daf/ca/

Major projects association (UK) Governance resources: 
https://majorprojects.org/knowledge/search/?fwp_search_resources=governance   

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