Closing the gap between project management and governance

a roadmap for gaining and demonstrating maximum value for your project investments

Abstract

In today's increasingly competitive marketplace, budgets are tight, resources are limited, and making smart decisions—about which projects to pursue and which not to pursue--have become vital to supporting the organization's growth, vision, and value. The best way to ensure and demonstrate value to the executive team is to know and understand what is truly occurring in your project portfolio – through greater visibility into what projects and programs are underway at any given time, how they are supporting the organization and, more specifically, what financial and operational results these projects have generated.

Implementing sound project management practices, along with a governance framework can enable this kind of visibility and control. According to CIO magazine, successful companies with better than average IT governance earn at least a 20 percent higher return on assets than organizations with weaker governance and project management practices. The article notes that MIT research findings suggest that good IT governance makes companies more successful by establishing coordinated mechanisms that link objectives to measurable goals. (Pastore, 2002) This session will highlight the value of closing the gap between project management and governance.

Ms. Davis-Muffett and Mr. Kerr will share with you these best practices and how they can help you demonstrate the value of your projects to stakeholders, and will also share original research results that support the notion that companies can reduce spending and better utilize resources with greater oversight, attention, and accountability. The trend toward oversight entities and practices that emphasize accountability indicates the growing importance of governance across the board—and this session will help you to harness these results to gain the support you need. The session will also highlight examples of organizations that have achieved greater results with a solid focus on governance activities and how they have used those results to gain buy-in throughout their organizations.

Introduction

In today's increasingly competitive marketplace, budgets are tight, resources are limited, and making smart decisions—about which projects to pursue and which not to pursue—have become vital to supporting the organization's growth, vision, and value. With the proliferation of technology at a greater and greater speed, the options that could bring potential benefit are seemingly endless. Gone are the days when a great technological idea is an end in itself. Technology has truly become an enabler, across all industries, organization sizes and types. The challenge now is to understand, very precisely, what business goals can be enabled by a technology, and to choose the best projects to accomplish that goal. This is the CIO's ticket to a seat at the executive table.

But just understanding the business goals isn't enough. The best way to ensure and demonstrate value to the executive team is to know and understand what is truly occurring in your project portfolio – through greater visibility into what projects and programs are underway at any given time, how they are supporting the organization and, more specifically, what financial and operational results these projects have generated. And once that hard work is done, the technologist must step out of his or her comfort zone and become a marketer—or bring a marketer onto the team—to communicate and celebrate successes broadly and gain mindshare among the larger organization and beyond.

The Governance Framework

Integrating Portfolio Management – From Top to Bottom

In recent years, there's been a lot of talk about “governance,” but very little discussion of what that really means. At its most basic level, governance is simply oversight and control – the often overlooked skill of basic good management. But, of course, that's not all there is to it. If it were that simple, it probably wouldn't generate such buzz.

What any individual is trying to achieve when espousing the merits of “governance” probably has more to do with his or her perspective than with any dictionary or professional association definition. Governance talk is on the rise because technology has become ubiquitous—no longer isolated and contained to the realm of the geeks, but now essential to hold up nearly every business decision and process. Unfortunately, this doesn't mean that technology has become easier to understand. As a matter of fact, the decisions have become more complex, requiring greater and greater levels of expertise to make the right choices.

For both technology and line of business executives, this leads to frustration. CIOs want input from line of business executives, and those executives just want things to work. A column in CIO magazine sums the dilemma up nicely:

…IT governance drives CIOs crazy. Right now at companies across the planet, supposedly sane executives responsible for the fate of companies refuse to take part in such pivotal IT and business decisions as architecture choices, standards and infrastructure platforms. And to add injury to this insult, they lay all the accountability for the decisions' success (or more likely, lack of success) on the IT group. Pastore, 2002, ¶2)

The problem is, many of the players involved in these choices simply don't speak the same language. So how can they be expected to effectively weigh the benefits of any given course of action?

Enter the rising tide of governance processes, such as project portfolio management and the affiliated disciplines of project and program management. When employed correctly, a portfolio management process linked with a robust project and program management rigor can truly be a silver bullet. The problems is, many of those “supposedly sane executives” and frantic CIOs cited above are in such a hurry to get to a solution that the examples of successful governance processes are too few and far between: “In the US, the mandate for portfolio management is clear, the overall processes and steps to maturity are in place, and in most cases the investment inventory is well described. Yet few organisations are realising the benefits - in terms of objective, consistent, repeatable and effective processes for selecting, managing and evaluating projects - that even rudimentary management by portfolio can bring.” (Viviers, 2004, ^2)

One of the major inhibitors to successful adoption of portfolio management, which can certainly provide many of the governance benefits sought around the boardroom table, is a lack of integration with other processes. The aspirations of these executives in terms of benefits often outstrip their management infrastructures.

Project portfolio management adds significant value to decision-making by tying project goals to the organization's strategy framework. This step can be a stumbling block, but isn't the most common area where organizations fall down. Assuming executive buy-in is in place and the organization's strategy is well-defined, that part is a piece of cake. The difficult part, though, is the link the portfolio manager must forge between that portfolio perspective and the project or program level information that may or may not be in a state to bring into the discussion.

While most organizations have pockets of disciplined project and program management, it's common to find those practices applied sporadically across organizational stovepipes—or not being employed at all in some areas. Without this critical data about the scope, health, and progress of initiatives, portfolio management can only go so far.

For a governance framework to be successful, it can't be only a bottom-up or a top-down approach. The champion of the initiative must have visibility and influence at all levels of the process, and be willing to put in the hard work to establish project management discipline if it doesn't exist, and get agreement on corporate strategy if it isn't already there before he or she has a real chance of success.

Taking a Results Mindset

So let's assume you've got the corporate strategic plan in hand and everyone agrees on the key goals for the next couple of years. You've got the right people at the table. You're certain that your project management process is working and it's consistent across departments and divisions. You're home free, right? Not so fast.

Another step where governance can fall down is at the point of defining project goals. Intuitively, project owners usually know what they expect from their projects. But how does that resonate with the executive team? What do those goals mean for them? A business case process is often part of the evaluation criteria for adding new projects to a portfolio, and it's likely you'll conduct an ROI analysis during that step. But is that enough?

CIOs now understand that server downtime and call center response simply aren't good enough metrics on their own. The old “count anything you can” strategy simply won't work anymore. It's more and more critical for owners of IT, portfolio management, and program and project management to be fully versed in the language executives speak.

Marketers work hard to understand the jargon of their intended audience before writing advertising copy or brochures. As project, program, and portfolio managers, it's essential to take that approach as well. But this goes beyond jargon or buzzwords. The essential language of top executives is results. It is critical to determine what results your executives will be judged upon and only communicate about activities that impact those results. If you can't find a way to tie your initiatives to results, it's time to evaluate whether they're worth spending your time on at all, let alone briefing the executive team on them!

Building a step into your project initiation process that determines what results will impact the company at the highest level and getting executive buy-in on those results will smooth many activities further down the line. This goes deeper than just “strategic plan” goals. How are your executives compensated? What measures are they bonused on? Is there a way that your initiatives will impact those? If so, you're nearly guaranteed to get their attention and participation in the governance process.

Closing the Loop on the Process

So, now we've built the right metrics into all of our projects at the outset, established a portfolio management process, and gotten the executives engaged in ongoing governance. Things are going along well. But inevitably, things change.

What happens when the organization's goals move, or when a project that looked great at the outset simply doesn't deliver the expected results? Obviously, that requires action. This is the point where the rubber meets the road. Portfolio management only actually ends up saving you money and balancing your portfolio if you're willing to do the unpopular and actually cancel projects.

Clearly, this means that you must have the authority and the responsibility for making that cancellation decision. Part of this is in having measures set up early on that will determine thresholds for pulling back or completely canceling projects. That's probably 49% of the battle. The other 51%, though, relies on how well you've been marketing yourself and your project to executives and other stakeholders. Do the right people believe in the process and, more importantly, believe that you know what you're doing?

Building Bridges to the Executive Team

Why Should They Care?

Ask any executive if they're in favor of good project portfolio governance, and you're most likely to get an enthusiastic “of course!” However, when you get into actually making the investment, both in terms of time and money, the answers get a little tougher. Good governance is hard to oppose, but it is easily killed by lack of decision to implement or lack of appropriate investment.

It is essential, therefore, to make a solid case for the value of creating a full governance process that spans the distance between good project management and good corporate strategy. IT analysts have made an excellent case for implementing portfolio management—the glue holding the governance structure together. According to Gartner Group's field research among over 200 commercial firms in various enterprises, there is a connection between IT investment planning and the relative profit performance of a company (Light, Rosser & Hayward, 2005), while Meta analyst Al Passori finds that “.CIOs who have already implemented one or more full cycles of [portfolio management] have significantly improved their organizations' return on IT investment, with some enterprises able to reduce costs 30%+, while improving effectiveness with enterprisewide asset deployment and management. Line-of-business (LOB) executives state they now have information never seen previously, greatly enhancing their understanding of IT investment impacts and improving decision quality.” (Passori, 2004) The combination of cost savings and better profit performance should move executives toward action.

Several Robbins-Gioia research studies have also uncovered the benefits of portfolio management to organizations' performance. In a 2004 survey, executives reported that 80% of those organizations that were either profitable or very profitable have a process in place to align projects and initiatives to strategy. And during another 2004 study among project and program management professionals, we found that those organizations with established governance processes, practices, and accountability activities show the least redundancy in projects and initiatives (something that certainly drives higher profit). In fact, of those organizations with less than 10% redundancy in projects and initiatives, nearly 75% indicate an established commitment to governance practices, processes, and accountability activities.

Lack of redundancy in projects and initiatives, along with a focus on results, will ensure that the initiatives that are undertaken are those that have the most benefit for the organization as a whole, and will drive better results at the highest level. This is the case that must be made to executives and will improve the level of support from senior executives.

Speaking to Be Heard

As so many specialists and technologists have learned, it's an art to get your message across. It's really not enough to be smart and competent. You have to understand your audience and meet them where they are. Take the example of IT. As a recent Computerweekly article puts it, “Giving a briefing on ITIL or COBIT to your chief executive is not likely to convince them that you have a firm handle on how IT is making an invaluable contribution to the business strategy.” (Turner, 2005, ¶10)

For those in the governance game, seated between the executive office and the project managers, this task is at least doubled. As discussed above, you have to learn how to speak in the language of results that dominates the boardroom. Just as importantly, however, you have to be able to understand what information you're getting at the project level and know how that translates into something that is meaningful to the corporate strategists. When a project manager on a major project tells you that they're running at a 5% cost variance, for instance, you need to know what questions you should ask to figure out if that's something significant or not. You can't just flow that project information right into your portfolio management and governance structure and expect that it will have an impact.

Make Marketing Your Approach To Governance

One of the important points to keep in mind as you try to close the gap between simply having good project management in place and truly adopting executive-supported, organization-wide governance practices is that you probably have allies and resources at your disposal. The hard work of setting up a program is in your court, but that only gets you part of the way. To truly get a governance approach adopted, you need to take a page from a marketer's book…and there's probably one down the hall or around the corner who would be willing to help you out.

Marketing, in a nutshell, is about understanding your audience—what drives them and what they are likely to understand—and crafting a message and a communication strategy that will get that audience to pay attention and take action. As you bring stakeholders into the governance process, you have to take the time to understand their perspective and what messages will make sense to them, and then spend the energy to develop appropriate messages and communicate those through channels that will reach those audiences.

This isn't just for the start-up of your governance program—as you continue through the governance process, you have to continue to market the achievements of your outstanding projects and the effectiveness of the governance process, as you reduce redundancies and keep the organization focused on strategic initiatives. Here, communication management must be taken to heights beyond those outlined in the Communication Management definitions of the A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (PMI, 2000). Progress briefings and status reports simply won't do it. If you want executive buy-in, you have to employ marketing techniques to win their hearts and minds and prove that the process adds value to the bottom line.

Conclusion

Good governance creates connections between all levels of the organization—the company's strategy, driven by senior executives; the project portfolio serving line of business executives; and the project and program managers working to get results from specific initiatives on a day-to-day basis. But governance is only as good as its level of support.

In order to ensure that your efforts at creating the right governance structure are valued and have an impact on the organization, you have to bring all of your skills to bear by putting the right process in place, getting the right people engaged, and marketing it to all stakeholders. Only by employing all of these tactics will you be able to show the kind of bottom-line improvements in terms of profits and results that will make you a hero and make your organization successful.

References

Ciliberti, R. (005) Using Project Portfolio Management to Improve Business Value. Posted on http://www-106.ibm.com/developerworks/rational/library/apr05/ciliberti/index.html Retreived on April 27, 2005.

Light, M., Rosser, B., & Hayward, S. (2005) Realizing the Benefits of Project and Portfolio Management. Gartner Group Research Note. January 4, 2005.

Passori, Al. (2004) Project Management Essentials: IT's About Governance. Meta Group Research Note. June 2, 2004. http://www.metagroup.com/us/displayArticle.do?oid=48657

Pastore, Richard. (2002) Governance Blues. CIO. February 15, 2002. http://www.cio.com/archive/011502/index.html

PMI(2000) A Guide to The Project Management Body of Knowledge [electronic version 1.3] Newtown Square, PA: The Project Management Institute.

Solomon, Melissa. (2002, March 18) Project Portfolio Management: Quickstudy. Computerworld 36(12) 52.

Turner, Mark. (2005, February 18) Evolving Technology Barbarians Will Need New Tools to Prove Their Value to the Board. Computerweekly.com.
http://www.computerweekly.com/Articles/2005/02/18/208421/Evolvingtechnologybarbarianswillneednewtoolstoprovetheirvaluetotheboard.htm#ContentContinues

Viviers, Paul. (2004) Requirements for successful enterprise portfolio management. ITWeb. October 7, 2004.

http://www.itweb.co.za/sections/techforum/2004/0410070826.asp?S=Enterprise&A=ENT&O=FRGN

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2005, Patricia Davis-Muffett& Keith Kerr
Originally published as a part of 2005 PMI Global Congress Proceedings – Toronto, Canada

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