Enterprise project governance (EPG) represents the ultimate evolution in the field of project management. It provides an overview of all fundamental components that affect the balance and effectiveness of projects of all natures across an organization. EPG proposes a top-down governance structure, which includes an integrated framework that involves board-level participation and encompasses all the major components of organizational project management. The paper ultimately spotlights how to translate business strategy into effective implementation of projects and programs that determine the success or failure of an enterprise. The components of enterprise project governance include strategy, risk, portfolio, organization, stakeholders, performance, and transformation. The benefits and challenges involved in pursuing the EPG concept are discussed and a case is presented.
Enterprise project governance (EPG)comprises an overview of the broad organizational spectrum of project management, representing anumbrella under which all project-related components reside. The paper focuses on the governance perspective of projects, because this represents the organizational frontier for providing substantial benefits in organizations. Although research has been done and publications exist on topics related to managing projects across an enterprise, organizations still wrestle with finding ways to govern the multiplicity of projects needed to survive and prosper in these challenging times. Scarcely recognized decades ago, project management expanded from a collection of techniques for controlling schedule, cost and quality for single projects, to include multiple projects including portfolios, programs, project offices, and issues of organizational governance.
Overall governance of projects includes the classic components of project management, such as portfolios, stakeholders, programs, and support structures. It focuses on all project-related factors in organizations and shows how a top-down governance structures are fundamental to ensure healthy and productive projects. EPG reaches beyond outstanding project performance and organizational pillars such as project management maturity and continuous improvement. EPG embraces an enterprise-wide perspective, including the organizational risks, the essential issues, and the business opportunities.
Project management has evolved through the ages, beginning with the intuitive approaches of ancient architects andgrew in the last century through successive stages that include these aspects: single projects; methodologies; software; multiple projects; programs; project portfolios; project management office; and issues of governance.
So, from ad hocproject approaches to complex views of portfolios, programs, and projects, the field of project managementreveals an increasinglybroadened scope. This evolution has reached the level of enterprise project governance — the umbrella of policies and criteria that comprise the laws for the sundry components that make up the world of projects. In the beginning of the 21st century, scenarios of governance for managingprojects vary from free flowing laissez-faire to formalized corporate PMO oversight. Enterprise project governance takes the evolution a step further, encompassing an all-inclusive approach to projects across an enterprise, involving all players, including board members, CEO, other C-level executives, portfolio managers, PMO managers, and project managers.
How does EPG Relate to Corporate Governance?
EPG fillsa void left in many corporation′s governance policies, primarily with respect to transparency, accountability, and responsibility. Effective enterprise project governance ensures that corporate policies and accountabilities are defined with respect to project-related initiatives and endeavors. EPG is also a natural evolution in organizations that struggle with innumerous demands for new projects to be completed on tighter schedules, at less cost, and with fewer resources.
The need for EPG becomes more apparent as the world becomes increasingly projectized. With more projects clamoring for attention, the demand to undertake, manage, and complete multiple projects creates a need to provide greater governance and structure. Corporate governance also includes the concerns of the ongoing organization, with its status quo activities and operational issues, whereasEPG, under the corporate umbrella, focuses on the new, the change, and the projectized parts of organizations.
Key Components of Enterprise Project Governance
In fulfilling the EPG role, the key activities for project sponsors and steering committee member to address are: strategic alignment; risk management; portfolio management; organization, stakeholder management; performance evaluation; and business transformation. Implementing project governance requires a framework based on these major components, as presented in Exhibit 1.
The responsibility of EPG is to ensure that projects are consistent with company strategies and goals and that the projects are implemented productively and effectively. All investment activities are subject to the governance process in that they need to be resourced and financed adequately. For mandatory projects, the decision is not whether to undertake the project but how to manage it in order to meet the required standard with minimum risk. For discretionary projects, more focus is required on the go/no-go decision and whether the project supports the strategic objectives and the investment gives best value compared with other alternatives.
Risk management is a systematic process of identifying and assessing company risks and taking actions to protect a company against them. Organizations need risk management to analyze possible risks in order to balance potential gains against potential losses and avoid expensive mistakes. Risk management is best used as a preventive measure rather than as a reactive consequence. Managing risk in an integrated way can mean everything from using financial instruments to managing specific financial exposures, from effectively responding to rapid changes in the organizational environment, to reacting to natural disasters and political instability.
The project portfolio provides a big-picture view. It enables managers to become aware of all of the individual projects in the portfolio and provides a deeper understanding of the collection as a whole. It facilitates sensible sorting, adding, and removing projects from the collection. A single project inventory can be constructed containing all of the organization's ongoing and proposed projects. Alternatively, multiple project inventories can be created representing project portfolios for different departments, programs, or businesses. Since project portfolio management can be conducted at any level, the choice of one portfolio versus many depends on the size of the organization, its structure, and the nature and interrelationships among the projects that are being conducted.
Effective governance starts with leadership, commitment, and support from the top; however, such leadership, although crucial, is not enough. Appropriate organizational structure, roles, and responsibilities are required for all stakeholders. There are three main organizational components to EPG: executive leadership, the portfolio management team, and program and project managers. Effective EPG requires that the individuals who direct and oversee governance activities be organized, and their contributions modeled to ensure that authority and decision making have a clear source, the oversight is efficient, and the needs for direction and decisions are addressed. Much of enterprise project governance may be carried out by committees, which may be done by multiple committees working at different levels. The committees or work teams used depend on organizational structures and culture, so not all organizations employ these committees at the same time. EPG is a collaborative process requiring a healthy mix of corporate, business units, and technical support services.
In every undertaking, different parties have vested interests in the activities and expected results. These parties are called stakeholders: individuals with some kind of stake, claim, share, or interest in the activities and results of the project in question, in this case EPG. Identifying these parties early on leads to effective stakeholder management. Everyone has expectations that determinetheir behavior. Expectations are visions of a future state, often not formally manifested, but which are critical to success. Expectation management is crucial in all settings where people must collaborate to achieve a shared result. More information on stakeholder management in EPG settings is given later in this paper.
For EPG to be effective, overall performance has to be measured and monitored on aperiodic basis to ensure that it contributes to the business objectives while at the same timeremaining responsive to the changing environment. Performance is typically evaluated during execution of an implementation plan, yet due attention is required for ongoing monitoring as well.
Effective business transformation requires having a continuous process in place, essential for organizations to implement business strategy and achieve its vision. This requirement is ongoing, because vision and strategy require adaptation and refinement to adjust to changing economic influences. Business agility, or the ability to achieve business transformation, is a measure of both management and corporate success and, as such, essential in pursuing the implementation EPG. Establishing change capability enables clients to continue optimizing performance in response to changing service demands and new strategic drivers.
The relationship between the EPG factors and other organizational components is shown in Exhibit 2.
The EPG Scenarios
Success in pursuing the enterprise project governance model hinges on existing organizational scenarios and the expectations of key stakeholders. Three distinct scenarios are described in the following text, along with recommendations for dealing with the issues inherent to each of the settings.
Board-sponsored EPGis based on premises proposed by organizations having knowledge and connections with the field of project management. Here enterprise project governance extends the principles of corporate governance and the ones considered by the Association for Project Management, ProjectManagement Institute, the United Kingdom's Office for Government Commerce, and the International Organization for Standardization regarding the management of projects through governance structures and oversight at a business level. This approach aims at guaranteeing that programs and projects are delivered effectively and efficiently or are cancelled when appropriate.
In this first scenario, corporate governance creates specific committees related to EPG, with names like “strategic planning and implementation,” “operations oversight,” “product development,” or “events and programs.” These committees can influence EPG policies as well as maintain oversight rights. Organizations with corporate governance committees having scopes that relate to governance of projects include: The Global Fund (a major organization aimed at fighting AIDS, tuberculosis, and malaria) under a “Portfolio and Implementation Committee”; andL'Oreal, the French cosmetics conglomerate that maintains a “Strategy and Implementation Committee.”
How might these board-level committees help shape EPG policies? Although overall executive responsibility for implementing projects resides with the CEO and management team, a board-level committee can exert an influence on the selection and implementation of strategic projects — those that will ultimately affect the company's future. Here are actions appropriate for board-level committees that propose to focus on issues such as planning, strategy, and implementation:
- Require policies for selecting and prioritizing strategic projects;
- Require the organization to addresses issues of enterprise project governance, including project portfolio management;
- Set up a policy for oversight review of a few key initiatives (but avoiding micro-management);
- Establish appropriate communication channels;
- Require periodic project management maturity assessments.
Since the common practice among many boards is to concentrate only on broad issues related to business ethics, risks, auditing, CEO succession, and internal board administration, all otherresponsibilities are handled by the permanent executive staff under the leadership of the CEO and executive team. So, although this second school (CEO-sponsored EPG) is similar in concept to the first, in this case, the board delegates full responsibility to the CEO. Therefore, the board provides no input or oversight to projects in the enterprise. Enterprise project governance takes place fully within the scope of the company's full-time professional leadership. Policies, structures, and procedures for EPG are therefore developed under the umbrella of the CEO and C-level colleagues, and delegated to appropriate levels within the organization.
EPG then is just one of several responsibilities of the CEO, who is charged with making projects and everything else, work effectively. The board's role regarding EPG is limited to hiring and firing the CEO, who hopefully will be enlightened with respect to project governance policies. This limited EPG scope for board committees is prevalent in the corporate world and is adopted in organizations such as General Electric, Accenture, Roche, and Volkswagen. EPG then is a matter to be organized and structured by the CEO and the executive team.
Where corporate governance has delegated full responsibility to the CEO to deal with all management and organizational matters, including strategies and projects, then it befalls on the CEO to provide for interface between the strategists (upper management and business planners) and the implementers (program and project managers). Here are some of the ways the CEO can effectively deal with the project-related issues across the organization:
The Chief Project Officer
In large organizations, the challenge of effectively coordinating hundreds of complex projects can be too much for a conventional hierarchical organization to handle. A solution to this is to designate a project-wise C-level executive to help coordinate the governance and oversight of multiple projects and major programs. This executive, called the Chief Project Officer (CPO), shoulders the overall responsibility for EPG in the organization. Other terms like VP for Special Projects, Head of Program Management are also used to describe the same function. How a CPO operates depends on the maturity level of the organization with respect to project management (methodologies, past experience, and support), and the size and complexity of the projects. It also depends on the conviction of top management with regard to using an enterprise project approach to managing, and the nature of the organization — whether it's project-driven, like an engineering company or functionally-based, like a manufacturer of toothpaste that uses project management as a means to an end.
The CPO function makes particular sense in organizations that are global, multi-disciplined and require timely delivery of multiple, complex projects. A CPO's responsibility is to care for the organization's portfolio of projects—from the business case to final implementation, which includes:
- Involvement in the business decisions that result in new projects;
- Strategic project planning;
- Setting priorities and negotiating resources for projects;
- Oversight of strategic project implementation;
- Oversight of an enterprise-wide project management system;
- Development of project-management awareness and capability throughout the organization;
- Periodic project review, including decision to discontinue projects;
- Top level stakeholder management, facilitation and mentoring.
The Corporate Project Management Office
The Corporate Project Management Office (CPMO) is a small, strategic group, sometime called the Strategic Project Office. The CPMO is the link between the executive vision and the project-related work of the organization. Its functions include overseeing strategic items such as project management maturity, project culture, enterprise-wide systems integration, managing quality and resources across projects and portfolios, and project portfolio management. The CPMO is responsible for the project portfolio management process and ensures that the organization's projects are linked to corporate strategies. The CPMO ensures that the organization's project portfolio continues to meet the needs of the business, even as these needs continue to change over time. It serves as the critical link between business strategy and execution of tactical plans.
The Program Management Office and Committees
The Program Management Office (abbreviated PgMO to distinguish from the Project Management Office, PMO), operates at a less strategic level than the CPMO and is designed to provide coordination and alignment for projects that are inter-related under the umbrella of a given program. An alternative approach for dealing with EPG issues involves the use of committees to provide the strategic guidance and oversight coverage for project management endeavors. Here are examples: Committee for Strategic Projects, Strategic Steering Committee, and Portfolio Review Committee. These committees have authority for prioritizing projects that cut across functional departments and are composed of executives from throughout the organization to ensure consensus and balance.
The CEO thus has multiple options for providing strategic guidance for managing projects across the enterprise. Which approach is the best fit and how the organization will be structured depend on existing company culture, developing needs within the organization, and the opinions of the principle decision makers.
The third approach operates under the following assumptions: corporate governance provides no committee coverage for EPG, and the organization under the CEO establishes no formal structure such as a CPO or CPMO to deal with issues of portfolios, programs and projects. Here, the challenge of dealing with multiple projects of sundry natures persists, yet the responsibility is scattered throughout the organization.
In this setting, a growing awareness exists at the middle management and professional levels regarding the need for a coherent enterprise-wide set of policies, competencies, and methodologies for managing projects of all natures and types. At this hands-on level, benefits for an EPG-type approach is evident to participating stakeholders, because this holistic view implies the organization will be supported with appropriate systems, trained personnel, and an overall project culture.
The awareness, however, is not so evident to upper management. Proposals to top decision makers for an over-arching program like EPG fall on deaf ears. This leaves the interested parties with two options. The first is to “go with the flow” and keep plugging away as best possible and hope that something will sway opinions in the future. The other option is to take a proactive stance and embark on a policy of advocacy for the EPG cause. This implies using techniques of influence management to create interest and awareness. Here are some effective approaches:
• Target potential champions that might help carry the flag for the EPG cause;
• Distribute published literature, including magazines and Internet publications that documents how competitors or other organizations take project management to a higher levels;
• Use indirect influencing by involving people who have access to the ears of the decision makers;
• Prepare a business case showing feasibility and proposing a step-by-step approach.
Such a bottom up approach may be articulated by existing PMOs because they surely have awareness and interest in articulating such a movement.
Enterprise project governance can be implemented in sundry ways. How to proceed depends on factors, such as the actual need, the existing culture, presence of a champion, and a feasible plan for making the implementation. Initiative for promoting the EPG concept may start at different levels, such as the board, CEO and executive team, middle management, or the professional level “bottom up” approach. The relationship between the components of EPG and suggestions on how to implement EPG are discussed as follows.
A Simplified Incremental Approach for Starters
Even though an orchestrated program under the EPG label stands the best chance of generating effective results on a timely basis, formal EPG is in reality an evolutionary approach involving different initiatives, depending on each organizational setting. A number of reasons justify using incremental approaches to upgrading the effectiveness of project management across the enterprise. Some of these include: minimal awareness in the organization about the impact project management at all levels has on overall results, and lack of a project management culture, including trained professionals and managers. Other reasons include insufficient sponsorship to champion the cause and lacking expertise in change management techniques. In these settings, where the scenario isn't yet favorable for a formal program, partial initiatives are appropriate, such as:
- Intensify training programs in the basics of project management;
- Stimulate use of project management techniques across the enterprise in all types of projects, including engineering, TI, R&D, new product development, marketing, and HR;
- Create awareness at the executive level through the literature, benchmarking, and conferences;
- Identify potential sponsors for a broader program;
- Stimulate implementation and development of PMOs.
With these measures in place, an organization will be on its way to producing highly successful projects of all natures across the enterprise. Where scenarios are favorable, however, a comprehensive EPG program offers an accelerated, holistic, and integrated way to guarantee optimal project performance and boost overall organization results.
Checklist for an EPG Plan
The elaboration of an EPG plan may ultimately develop into the basis of a manual for maintaining the concept in place. Such a manual becomes a register for definitions, approaches, processes, and lessons learned from execution, becoming a legacy for new entrants to receive as an introduction to EPG. As time goes on, the document will be subject to adaptation, review, change, and improvement, creating an organizational learning cycle. Here is a checklist for developing an EPG Plan.
Stakeholder Size Up
For Enterprise Project Governance, principle stakeholders fall into the “champion” category. These champions have the power to initiate projects and shape their ultimate impact on the organization, and their decisions end up affecting all other internal and external stakeholders. In generic terms, the champions include: investors, project sponsors, upper management overseers, clients (external or internal), and politicians (local, state, federal). Exhibit 3 depicts some of the major stakeholders in the EPG arena.
Context and Culture
Understand the internal and external business contexts and current culture in which the organization operates, so that the EPG system can address current realities and identify opportunities to enable change and better achieve desired outcomes.
- External Business Context — analyze the external context and key issues impacting the organization;
- Internal Business Context — understand the organizational structure and key assets that drive organizational value;
- Culture — analyze the existing culture, including the organizational climate and attitudes toward projects and compliance; analyze the characteristics of the culture that may impact the EPG system.
Promote and motivate expected behaviors by organizing the regulatory environment, policies, methodologies, standards, and guidelines.
- Mandatory Compliance —make explicit all the necessary compliances;
- Policies — develop and implement policies which address portfolio, program and project development. These policies must include software recommendation;
- Methodologies — describe all the methodologies that must be adopted for portfolio, programs, and projects;
- Standards and Guidelines — describe all the standards and guidelines available.
Investment activities are subject to a governance process to be resourced and financed adequately. For mandatory projects, the decision is not whether to undertake the project but how to manage it using the appropriate methodologies in order to meet the performance requirements. For successful program and project selection, attention is focused on alignment with strategic objectives and the “go-no go” decision with respect to best value.
- Explicit EPG Mission, Vision, and Values — make explicit the foundations upon which the EPG system is developed;
- Strategic Referential — establish the criteria by which projects and programs will be selected. A strategy map is always a useful tool;
- Value Creation Referential — make explicit the benefits expected from the strategic referential.
Managing risk in an integrated way allows effective responses to rapid changes in the organizational environment, natural disasters, and political instability. For such, an overall organizational risk management approach is required pinpointing the critical organizational risks, andoutlining how to analyze risks in portfolio, program and project management.
- Risk Processes — Describe the processes used in portfolio, program, and risk management;
- Risk Integration — Describe how the approach to portfolio, programs, and projects are integrated with the overall risk approach to the organization;
- Crisis Response, Continuity, and Recovery — Describe how to respond to crisis issues and business disruption.
A single project inventory can be constructed containing all of the organization's ongoing and proposed projects. Alternatively, multiple project inventories can be created representing project portfolios for different departments, programs, or businesses. Since project portfolio management can be conducted at any level, the choice of one portfolio versus many depends on the size of the organization, its structure, and the nature and interrelationships among the projects that are being conducted.
- Portfolio Proposals — Describe how to select projects and programs that represent the best value to the firm and that are aligned with strategy;
- Portfolio Processes — Describe how the portfolio will be managed;
- Portfolio Integration —For companies with portfolios across business units or geographical areas, describe their integration processes.
Structure, Roles, and Responsibilities
To be effective, the individuals who direct and those who oversee governance activities must be integrated, and their contributions modeled to ensure that authority and decisionmaking have a clear source, the work of management and oversight is efficient, and the needs for direction and decisions are addressed.
- Goals and Expected Outcomes of the EPG System — define the scope of the EPG system, what it will achieve, and how it relates to the business objectives;
- Key Roles and Accountabilities — define and enable oversight roles and accountability.
- Board Roles and Accountabilities — the Board has oversight of the system and ultimately is the active monitor for shareholder and stakeholder benefit. The Board must:
- address long-term issues;
- direct the purpose and desired outcomes of the organization;
- set a charter for its involvement;
- set business objectives and ensure they are congruent with values and risks;
- obtain regular assurance that the system is effective.
- Committees Roles and Accountabilities — in order for the EPG system to operate effectively many committees may be needed to support the board's decision-making processes. Most EPG work is carried out by committees and, in many organizations, multiple committees work at different levels. The actual committees depend on the organization size, culture, and leadership style.
- The Role of Management
- design, implement, and operate an effective EPG system;
- provide regular assurance about the effectiveness of the system;
- communicate with key stakeholders about issues arising;
- evaluate and optimize the performance of the system.
- The Role of Assurance — Management should obtain and provide regular assurance about the effectiveness and performance of the EPG system. An independent expert can reveal weaknesses in design or operation, opportunities for integration and exchange of best practices. For its part, the Board is required to obtain regular assurance about the effectiveness of the system. Internal or external independent reviews can be used. Those providing assurance, whether internal or external, should:
- provide assurance that risks are appropriately identified, evaluated, managed, and monitored;
- provide regular assurance to the Board and management of the effectiveness of the EPG system in light of the organization's culture and objectives.
- Decision-making Processes — A set of processes must be established as authoritative and within which portfolios, programs, and projects are initiated, planned and executed, to ensure that goals and benefits are met.
- Project Identification — describe the processes for proposing a program or a project, including if it is a mandatory one or aligned with business objectives;
- Project Selection — describes how projects and programs are selected and how to decide for go\no go;
- Why-How Framework — describe how to develop a why-how framework for each project or program;
- Project Start-Up — describe how to initiate a project or a program;
- Project Reviews — describe the approach for programs and project reviews;
- Risk Processes — describethe boas practices to be applied for the program;
- Portfolio Processes —.describe the processes chosen to deal with handling the management of portfolios.
This checklist provides a guideline for embarking on a program of enterprise project management. It serves as a basis for developing a customized plan for addressing the specific issues and desires of any given organization. Some of the requirements may already be in place, whereas others may require major planning and implementation effort.
Challenges and Roadblocks in Implementing EPG
As in any other endeavor involving change in an organization, well-developed plans can pave the roadway for smooth motoring toward desired goals. Here are ways to prevent problems along the route to EPG:
- Show what the competition is doing with regard to project management;
- Demonstrate studies from professional associations, such as PMI and IPMA, regarding the impact of an organizational approach to project management;
- Benchmark with other companies with known expertise in high-level project management;
- Do a risk analysis of the implementation project, including factors such as probable challenges, likelihood of occurrence, and stakeholder influences.
Despite a well-planned rollout of an EPG project, unexpected challenges may appear along the way. Corrective approaches to unexpected barriers include:
- Put the program temporarily on pause. Sometimes time itself will sort out an issue;
- Re-evaluate the situation. What has changed? What new factors have come into play?
- Replan. If a plausible Plan B is on stand-by, then put it into play. If not, then develop a modified plan.
Ericsson: a Case of EPG Evolution
In practice, many organizations evolve over time toward a broad enterprise approach for managing projects. Such is the case of Ericsson, a global telecommunications manufacturer headquartered in Sweden, that spent decades developing project management expertise. Known as PROPS (for PROject for Project Steering), the framework's objective is to enable project managers anywhere in the world to complete their projects successfully. In the late 1980s, the company developed the first PROPS version to support the development of digital telecom switches. The introduction of mobile telecom networks sparked the need to develop a more generic model that was uncoupled from specific product lines. Later, generic versions were developed with focuses on (1) customer projects, (2) market-based R&D and (3) internal company projects. This broadened the focus to general project management practices and encompassed the business context of projects.
Ultimately, this led to the company's projectization, where projects became the way of working at Ericsson, because as much as 80% of the company's employees work on projects The PROPS framework has gone through multiple versions and has become a framework for enterprise project management aimed at all project-related areas, including project management, program management, portfolio management, and project offices. Focus is on the enterprise as a whole and multiple projects of sundry natures. The key points of the PROPS framework are:
- business perspective;
- human perspective;
- project life cycle model; and
- project organization model.
In essence, the framework contains the basics for enterprise project governance, and is used as a basis for similar programs at Volvo, Saab and other international companies.
The creation and evolution of PROPS were sponsored and supported by top management. A small unit responsible for project management support was given the assignment to host the framework and acted as an internal consultancy team. A group of technical writers was brought in to ensure that PROPS was documented and launched in a way that would be reader friendly and attractive to potential users. Later, an internal center of excellence became responsible for development of PROPS, as well as for project management training and support. This focused group of people dedicated to PROPS cause was a key factor for its success.
Ericsson gradually developed a fully projectized culture from top to bottom, and did so by continuously upgrading its basic project management framework, with the full involvement and support of top managers. According to Ericsson's Inger Bergman, “Changing a company from a traditional hierarchical, functional manufacturing industry to an agile player in the IT area is not easy and takes time and effort. Project management is now seen as an important asset for the company and a competitive advantage in R&D and sales delivery.” Ericsson is an example of the evolution of project governance capabilities.
Enterprise project governance offers a transformational route for organizations striving to deliver strategy through improved oversight of portfolios, projects and programs. The discipline of EPG ensures that portfolios and programs are composed of the right projects and that the best resources are available to manage them. When EPG's multiple components are successfully coordinated and integrated, the optimal combination of the right projects are completed as planned, thus ensuring an organization's growth and prosperity. Corporate governance is the umbrella held by the board under which the CEO and executive teams implement a portfolio of projects and programs that produces the desired benefits. EPG is the bridge that spans the gap between an organization's best of intentions and the actual goals achieved through projects.