Project Governance and Portfolio Management

1. BE1170 Project, Programme and Portfolio Management: Project Governance Robert C Moehler School of the Built and Natural Environment Northumbria University Wynne Jones Building (106a)Ellison Place Newcastle upon Tyne NE1 8ST +44 0 191 227 4746 robert.moehler2@northumbria.ac.uk

2. Readings for this Lecture Association for Project Management (2012) APM Body of Knowledge 6th edn. Buckinghamshire: APM Publishing. Aguilera, R. V., Williams, C. A., Conley, J. M. and Rupp, D. E. (2006) Corporate governance and social responsibility: a comparative analysis of the UK and the US. Corporate governance, 14(3), 147 – 158. Bekker, M. C. and Steyn, H. (2008) The impact of project governance principles on project performance, PICMET Conference 2008, July 27-31. Cape Town: PICMET. Bittner, E. and Gregorc, W. (2010) Experiencing Project Management. Erlangen: Siemens. Bloomquest, T. and Müller, R. (2006) Middle Managers in Program and Portfolio Management: Practice, Roles and Responsibilities, Newton Square, PA: Project Management Institute. BS 6079-1 (2002). Guide to Project Management. London, BSI. Caporaso, J. A. and Wittenbrinck, J. (2006) The new modes of governance and political authority in Europe. Journal of European public policy, 13(4), 471 – 480. Castells, M. (1996) The rise of the network society. Oxford: Blackwell. Child, J. and Rodrigues, S. B. (2003) Corporate governance and new organizational forms: issues of double and multiple agency. Journal of management and governance, 7(4), 337 – 360. Clegg, S.R., Pitsis, T.S., Rura-Polley, T. and Marosszeky, M. (2002) ‘Governmental matters: Designing an alliance culture of inter-organisational collaboration for managing projects’ Organisation Studies, 23(3): 317-37. Flyvbjerg, B. (2011) ‘Over Budget, Over Time, Over and Over Again Managing Major Projects’, in Peter W. G. Morris, Jeffrey K. Pinto, and Jonas Söderlund (eds.) The Oxford Handbook of Project Management, Oxford: Oxford University Press. HM Treasury (2003). The Green Book: Appraisal and Evaluation in Central Government, Treasury Guidance, London: TSO. Helm, J. and Remington, K. (2005) ‘Effective Project Sponsorship: An Evaluation of the Role of the Executive Sponsor in Complex Infrastructure Projects by Senior Managers’, Project Management Journal, 36(3): 51-61. Kaufmann, D. (2005) Myths and realities of governance and corruption. In: World Economic Forum Global competitiveness report 2005-2006. New York: Oxford University Press. pp. 81 – 95. Klakegg, O.J., Williams, T., Magnussen, O.M. and Glasspool, H. (2008) ‘Governance frameworks for public project development and estimation’, Project Management Journal, 30/Supplement: S27-S42.

3. Readings for this Lecture Miller, R. and Hobbs, B. (2005) ‘Governance regimes for large complex projects’, Project Management Journal, 36(3): 42-50. Müller, R. (2011) ‘Project Governance’, in Peter W. G. Morris, Jeffrey K. Pinto, and Jonas Söderlund (eds.) Oxford Handbook of Project Management, Oxford: Oxford University Press. Mueller, R. (2009) Project Governance. Surrey: Gower Publishing. Müller, R. and Stawicki, J. (2007) ‘A framework for building successful project based organisations’, Project Perspectives, 29(1): 68-71. Müller, R. and Turner, J.R. (2005) ‘The impact of principle-agent relationship and contract type communication between project owner and manager’, International Journal of Project Management, 25(5): 398-403. Müller, R. and Turner, J.R. (2002) ‘A Model and Gap-Analysis of Buyer – Seller Communications in IT Projects’, in Proceedings of the PM-Days Research Conference, November 27-28, 2002, Vienna, Austria. McWilliams, A., Siegel, D. S. and Wright, P. M. (2006) Corporate social responsibility: strategic implications. Journal of management studies, 43(1), 1 – 18. OGC (2008) OCG governance, Office of Government Commerce, http://www.ogc.gov.uk accessed 12th March 2012 Pinto, J.K., Slevin, D.P. And English, B. (2009) ‘Trust in projects: An empirical assessment of owner/contractor relationships’, International Journal of Project Management, 27(6): 638-648. Pryke, S.D. (2005) ‘Towards a social network theory of project governance’, Construction Management and Economics, 23: 927-39. Pryke, S.D. and Pearson, S. (2006) ‘Project governance: Case studies on financial incentives’, Building Research and Information, 36(6): 534-45. Ruuska, I., Aholaa, T., Arttob, K., Locatellic, G. and Mancini, M. (2011) ‘A new governance approach for multi-firm projects: Lessons from lkiluoto 3 and Flamanville 3 nuclear power plant projects’, International Journal of Project Management, 29: 647–660. Shenhar, A., Dvir, D., Milosevic, D., Mulenburg, J., Patanakul, P., Reilly, R., Ryan, M., Sage, A., Sauser, B.,Srivannaboon, S., Stefanovic, J. and Thamhain, H. (2005) ‘Toward a NASA-specific project management framework’ Engineering Management Journal, 17(4): 8. Stoker, G. (1998) 'Governance as theory: five propositions', International Social Science Journal, 50 (155), pp. 17 - 28. Shankman, N. A. (1999) Reframing the debate between agency and stakeholder theories of the firm. Journal of business ethics, 19, 319 – 334.

4. Warning Controversial No sales pitch

5. Objective • To understand • What is the purpose of project governance? • How do you actually implement it? • What value does it bring and how do we prove it?

6. Most organisations don’t do it “I don’t care what the report says, I don’t care you’re going to deliver late, with less functionality. Because that’s not going to happen. You will be on time, and it will work. Now stop wasting your time in my office and go make it happen.” 12 months later the project is canned after being £45m over budget. £165m spent. Zero benefits. The implementation partner was kicked out. The senior exec kept their job, no questions asked.

7. Most organisations don’t do it “This project is pushed for time. The deadline is very tight. The team is a little smaller than ideal so we’re going to have to work efficiently and hard. But if we pull together we can deliver this.” The project delivers 35% late (compared to baseline estimate). Attrition rate of 25% of team members.

8. Most organisations don’t do it • And 101 other examples • A business case that doesn’t add up • Undefined requirements (or requirements not signed off) • Poor management around stage boundaries • Technically unfeasible projects • A large change programme in an organisation that doesn’t know how to change • Doing too many projects but start another one • No match to organisation strategic direction • Incapable delivery team • No cohesion or understanding on benefits expected • Huge risks not mitigated or understood prior to project kick off

9. Post report: 8 Causes of Project Failure • Lack of a clear link between the project and the organisation’s key strategic priorities, including agreed measures of success. • Lack of clear senior management and ministerial ownership and leadership • Lack of effective engagement with Stakeholders • Lack of skills and proven approach to project management and risk management. • Lack of understanding of and contact with the supply industry at senior levels within the organisation. • Evaluation of proposals driven by initial price rather than long-term value for money (especially securing the delivery of business benefits). • Too little attention to breaking development and implementation into manageable steps. • Inadequate resources and skill to deliver the total delivery portfolio.

10. Which are Associated with Governance? • Lack of a clear link between the project and the organisation’s key strategic priorities, including agreed measures of success. • Lack of clear senior management and ministerial ownership and leadership • Lack of effective engagement with Stakeholders • Lack of skills and proven approach to project management and risk management. • Lack of understanding of and contact with the supply industry at senior levels within the organisation. • Evaluation of proposals driven by initial price rather than long-term value for money (especially securing the delivery of business benefits). • Too little attention to breaking development and implementation into manageable steps. • Inadequate resources and skill to deliver the total delivery portfolio.

11. Those that say they do it… don’t Warren Buffet…

12. Those that do do it, do it wrong • We’re going to follow a strict methodology here… • We’re going to do it my way • I’d like your buy in on this… • I want someone else to blame when this thing bombs • We want you to be the executive champion on this project • I want to be able to blame you for my mistakes • There are larger issues at stake • I’ve made up my mind so don’t bother me with the facts

13. Health Warning Most organisations are not ready to accept ‘proper’ project governance

14. What is Governance? ITGovernance.co.uk – 6 areas of governance APM – 11 facets of project governance. TotallyOptimisedProjects – 26 areas of project governance Human Systems – 8 principles of governance HM Treasury – The 7 aims of project governance No-one can agree

15. APM recognised 11 principles have been identified for governance of project management. 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 of Governance of PM

16. Governance of project management Organisation Corporate Governance Project Management GoPM APM (2005) Directing Change: A Guide to governance of project management

17. Governance of project management Corporate Governance Activities Project Management Activities Portfolio Direction P. Sponsorship Disclosure reporting Project Management Effectiveness APM (2006, 2012)

18. What is Governance? No-one can agree And it doesn’t really matter!

19. Project Governance “...concerned with creating the conditions for ordered rule and collective action...” (Stoker, 1998) “...a set of management systems, rules, protocols, relationships and structures that provide a framework within which decisions can be reached for project development and implementation” (Bekker and Steyn, 2008) “...synonymous with good and transparent management of firms and institutions”(Müller, 2009)

20. Origin “Contemporary governance is grounded in Foucault’s(1926-1984) philosophy of Neo-liberalism, in which individuals are not directly“steered” by their supervisors but through subtle forces in the society (or company, or organisation) in which they live (or work for)... develop a strategyfor creating a domain whereby individuals are responsible and engage in ‘self-care’”

21. Origin • Project governance is not: • Project Controlas a mechanism within the confines of Planning and Execution of the Project (Initiate, Plan, Execute and Close) – managing ina project; • Instead project governance relatesto: • External Environmentit provides the context in which the project is activated and realised – to work onor forprojects.

22. Objectives of Governance • Let’s instead focus on what we want governance to achieve. • Stop things going wrong • Deliver the right benefits • Avoid non-value adding projects • Make sure the right ‘big’ decisions are made • If projects matter, project governance matters

23. Governing • Governance is about rules – self imposed – Government imposed – Peer/Profession imposed • Formal – Informal • Behaviour • Ethics • Rules of engagement

24. The roles in Governance Long term view Be negative not positive Work out which 30% of what you’re doing is wrong

25. Where does governance come from? • Rooted in Aims/Mission of business and the business plan? • Corporate governance • Direction, Administration & Control of Companies • The Processes, customs, policies & laws affecting these

26. Who sits in the Governance board? Keep it small Keep it senior NO(!) project stakeholders

27. Implementation What then are the keygroupsinvolved?: • Board of Directors:Strategic valueof projects • (Policy formation – Whoto be involved –Resources); • Project Sponsor: Crucial role[Helm and Remington, 2005; Müller and Turner, 2002] (Seniorin organisation – Networkingabilities – Confident – Charisma – Objective); • Steering group: Principle institution(Authority – Linkage role – Governance infrastructure/framework) • Stakeholders: ‘...all those who have a stakein the [project];...something to gain or lose through actions of [the project]’ (Müller, 2009). Narrowstaff/suppliers Widercommunities/industry.

28. Implementation • What questions should you ask and what answers should you expect that indicates all is well? • Remember your objectives! • Is this project benefit still worthwhile to achieve? • Are we going to achieve it? • Do we have confidence? If not, what are we going to do about it? • How does this project compare to our lessons learnt? • What’s the plan B? • What are we doing about the key risks?

29. Implementation • Honesty • Publish the decisions made and reasons why • Open these up to scrutiny • Publish the data that informed the decisions

31. Implementation of governance Müller and Stawicki (2007: 70)

32. Summary • Define objectives of governance • Set 1 or 2 things to focus on • Define the governance team • Keep it small • Keep it senior • Have a list of questions • Publish the decisions and the data to support them • Measure the value delivered

33. Questions and Answers Thank you very much, indeed! Robert Moehler School of the Built and Natural Environment, Wynne Jones Centre room 106a Northumbria University, Newcastle upon Tyne Email: robert.moehler@northumbria.ac.uk

34. Governance • Governance has become an important topic of conversation in recent years because of what we have previously discussed. But what is it? Have a look at Peter Eigen's TED Talk and think about the why and how! (http://www.ted.com/talks/peter_eigen_how_to_expose_the_corrupt.html ) • Culture: "nobody has time for an entire generation any more“ We live in a fast-paced environment; the modern human is impatient. This fact also changed his expectations towards culture. Peter Sloterdijk lets us know why we pack culture into projects that are the essence of landscape, regional and city planning. Return on investment - fast results. Greed is no longer the determining factor within the banking and finance system only, says Peter Sloterdijk when asked by 2010LAB.tv. Even in cultural politics, the return has become the determining factor. "The essence of cultural politics is impatience", explains the cultural scientist. The ramifications shall become visible as fast as possible - the economy as role model: "capitalism is nothing but the acceleration process for cultural projects", reports Sloterdijk. Is it just the impatience of politics or maybe even our own that promotes such mentality? Do we want to wait 25 years until the next generation change takes place or rather 3 months? At last, Peter Sloterdijk named the inhibition the highest utopia of democracy. "What happens if the "inhibitors" and the "accelerators" meet? Our society is experiencing change - we are in the middle of it and we have a say in where the journey shall take us. (http://www.labkultur.tv/en/video/peter-sloterdijk-nobody-has-time-entire-generation-any-more)

35. Please watch: http://www.ted.com/index.php/talks/clay_shirky_on_institutions_versus_collaboration.html Clay Shirky shows how closed groups and companies will give way to networks where small contributors have big roles and fluid cooperation replaces rigid planning. Consider: Is Shirky’s hypothesis applicable to the organisation of projects? New technologies enabling loose ­ collaboration — and taking advantage of “spare” brainpower — will change the way society works. Homework: