About the Author
Paul C. Dinsmore, PMP (Dallas, TX, and Rio de Janeiro) is an international authority on project management and organizational change. He has been honored with PMI’s Distinguished Contributions Award, and is a Fellow of the Institute.
LUIZ ROCHA, director of projects with Dinsmore, Associates, has 35 years of experience in project management, and has worked internationally with organizations including Andersen Consulting and Delloite.
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Enterprise Project GovernanceA Guide to the Successful Management of Projects Across the Organization
By Paul C. Dinsmore Luiz Rocha
AMACOMCopyright © 2012 Paul Dinsmore and Luiz Rocha
All right reserved.
Chapter OneIntroduction to Enterprise Project Governance
Evolution affects everything—including projects and how projects are managed. Projects have existed since the beginning of humankind. Egypt's Cheops, Leonardo da Vinci, and John F. Kennedy are some of the icons that have initiated or influenced the evolution of projects and their management. From its simplest form of running a single project, such as building a shelter from storms, to dealing with multiple and complex initiatives in ever-changing environments, such as high-tech space exploration, project management has broadened to a state of organizational entanglement that requires a rock-solid set of policies, structure, guidelines, and procedures. And the complexity is necessary if project managers are going to wrangle the plethora of projects that oft en butt heads at a stampede pace to achieve their desired goals.
Project management began from the intuitive logic of ancient architects and grew through successive stages of development that include these factors:
Methodologies Soft ware Multiple projects Programs Project portfolios Project management office Issues of governance
Thus the field of managing projects shows an ever broadening scope—from ad hoc, single-project approaches to a complex, all-encompassing view of portfolios, programs, and projects. This evolution peaks at the level of Enterprise Project Governance (EPG), the umbrella of policies and criteria that comprise the laws for the sundry components that make up the world of projects.
In real life, scenarios of governance in project management vary from free-flowing laissez-faire to formalized corporate PMO oversight. The typical ways project management is handled in organizations are:
1. Laissez Faire (whatever will be will be). Projects are carried out as required using intuitive approaches or methodologies that vary from one project to another. Nobody knows how many projects are underway in the company or the status of all the projects. 2. Departmental (territorial). Each department or area develops methodology and practice appropriate for that department. No cross-fertilization exists with other departments. 3. PMOs, Project Management Offices (one or several). Some companies have multiple PMOs, either at different levels or in different regions. They are sometimes connected, but they oft en operate independently. 4. Corporate-Level PMO (top-down oversight). Here, a chief project officer, a corporate project management office, or a strategic project management office cares for the implementation of strategic projects and for the overall project management practice in the company, including project portfolio management.
EPG goes a step further, proposing an all-encompassing approach to the management of projects across an enterprise, involving all players, including board members, CEO, other C-level executives, portfolio managers, PMO managers, and project managers. This book focuses on this overriding issue of Enterprise Project Governance and shows how the components of projects fit under its protective umbrella. The essence of EPG is explained in the answers to the following questions.
What is EPG anyway? Enterprise Project Governance is a framework residing under the umbrella of top management and corporate governance. It is aimed at ensuring the alignment of the corporate portfolio and its programs and projects with overall strategy, and that actions are proactively taken to confirm that everything stays on track ultimately to create value for the organization.
Why implement EPG? Enterprise Project Governance is designed to meet an urgent need: to find a way to deal intelligently and efficiently with the numerous projects and programs demanded by the marketplace, evolving technology, company stakeholders, regulatory agencies, and the quest to innovate. All of this is to be done with limited resources and at record-making speed. EPG presents an orderly and effective organizational approach for dealing with these critical issues.
Who are EPG stakeholders? Enterprise Project Governance stakeholders include initiators, change agents, and affected parties. An initiator might be a board member, the CEO, the CIO, other C-level executive, or an influential middle manager. Once the seeds are planted, active participation is required from change agents such as corporate PMO players, PMO members, IT (information technology) participants, and HR agents. The parties benefited include organizational stakeholders who need projects performed effectively and the professionals who deal directly or indirectly with projects.
When is it right to implement EPG? The conventional approach to deciding the right time is to do a size-up of the situation, using internal or external resources. A quick project management maturity assessment is helpful to understand the depth of knowledge and competency available in the organization. Answers to these questions also help evaluate the right time frame: What are the short-, mid-, and long-term benefits? Is the organization's culture ready, or is more change management required first? Is the right leadership prepared to take on the task?
Where should EPG be implemented? Implementation of Enterprise Project Governance is facilitated in a fertile setting and surrounded by influential stakeholders. Let's say a specific business unit has major challenges in implementing its projects and strong awareness among its executives. That is a good place to implement EPG. A ripe spot for initiating EPG is where a high-level champion of the cause resides and when a solid need for structuring projects exists.
How do you go about implementing EPG? Enterprise Project Governance can be implemented on sundry ways. How to proceed depends on such factors as the actual need, the existing culture, the 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 with the board, CEO and executive team, or middle management, or at the professional level in a bottom-up approach. This book is aimed at providing examples and cases of what works and what doesn't work in managing multiple projects and major strategic projects across an enterprise. The relationships between the components of EPG and the suggestions on how to implement EPG are shown in the list of abridged chapters at the end of this chapter.
Is a comprehensive EPG approach needed to achieve effective project management across the enterprise? 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 upgrade the overall effectiveness of project management across the enterprise. Some of these are:
Minimal awareness in the organization about the impact that project management at all levels has on overall results. A lack of a project management culture, including trained professionals and managers. Insufficient sponsorship to champion the cause. A lack of expertise in change management techniques.
When the scenario isn't yet favorable for a formal program, partial initiatives are appropriate, such as:
1. Intensifying training programs in the basics of project management. 2. Stimulating the use of project management techniques across the enterprise in all areas including engineering, IT, R&D, new product development, marketing, and HR. 3. Creating awareness at the executive level through the literature, benchmarking, and conferences. 4. Identifying potential sponsors for a broader program. 5. Stimulating the implementation and development of PMOs.
With these measures in place, an organization will be on its way to producing highly successful projects of all types across the enterprise.
When the 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.
EPG and Corporate Governance
EPG evolved in part due to the cascading changes that affected overall corporate governance beginning in the 1990s. Pressures from the marketplace, governments, and regulatory agencies placed a disconcerting spotlight on company boards to ensure that decisions and corresponding actions are fully traceable from the top down. Because a major part of organizational survival depends on new projects, EPG adds a measure of traceability and corresponding accountability to the basics of corporate governance.
The increasing focus on corporate governance can be traced to the stock market collapse of the late 1980s, which precipitated numerous corporate failures through the early 1990s. The concept started becoming more visible in 1999 when the Organization for Economic Co-operation and Development (OECD) released its Principles of Corporate Governance. Since then, over 35 codes or statements of principles on corporate governance have been issued in OECD countries.
In 2001 and 2002, high-profile corporate failures plagued major institutions. In the United States, Enron, WorldCom, Xerox, AOL Time Warner, Tyco, and Arthur Andersen were in deep trouble. In Europe, the same happened with Ahold, Bertelsmann, Vivendi, SK Corporation, Elf-Aquitaine, Londis, and Parmalat. The scandals in the United States led to the refinement of existing corporate governance aimed at protecting investors by improving the accuracy and reliability of corporate disclosures. The Sarbanes-Oxley Act of 2002 (SOX) is legislation enacted in response to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise. In the United Kingdom, in 2003, the Higgs Report zeroed in on the same critical issues.
Corporate governance emerged from the shadows of boardrooms and is in common use, not just in companies but also in the public sector, charities, and universities. The phrase has become shorthand for the way an organization is run and is classically composed of committees charged with responsibility for regulatory compliance, auditing, business risk, hiring and firing the CEO, and the administration of the board of directors' activities. The demand of shareholders and other stakeholders for good governance is strong and continuing. The evolution of corporate governance was prompted by cycles of scandals, followed by reactive corporate reforms and government regulations intended to improve the practice. Investors, unions, government, and assorted pressure groups are increasingly likely to condemn businesses that fail to follow the rules of good practice.
Corporate governance also serves to enhance organizational performance by establishing and maintaining a corporate culture that motivates directors, managers, and entrepreneurs to maximize project-based and operational efficiency, thereby ensuring returns on investment and long-term productivity growth. To that end, boards may also include additional committees for topics like research, ethics, and portfolios. Other high-priority themes, such as strategic projects, special events, and programs, may be included in board-level committees, but generally these are delegated to the organization under the guidance of the CEO.
Currently, there is no evidence of a universal set of corporate governance principles applicable to all countries and their organizations. However, corporate governance guidelines produced by OECD encourage the application of good corporate governance as a precondition for international loans to governments for financial sector and other structural reforms, as well as equity investment and bank loans to large companies. Although the pressure is currently on listed companies to make transparent their corporate governance principles, this requirement is likely to be extended not only to all listed companies, but also to other privately and publicly owned companies and organizations that want to use money from others.
Although there is a need to increase the overseeing of governance structures, this is not an easy task. As mentioned by James Wolfensohn, former president of World Bank:
a number of high profile failures in 2001-2002 have brought a renewed focus on corporate governance, bringing the topic to a broader audience ... the basic principles are the same everywhere: fairness, transparency, accountability, and responsibility. These are minimum standards that provide legitimacy in the corporation, reduce vulnerability to financial crisis, and broaden and deepen access to capital. However, applying these standards across a wide variety of legal, economic, and social systems is not easy. Capacity is often weak, vested interests prevail, and incentives are uncertain.
The high visibility heaped on corporate governance, sparked by the scandals at the beginning of the twenty-first century, brought attention to lacking governance policies in more specific disciplines. In the early 1990s, information technology executives perceived a crying need to put order into the then chaotic industry. Various programs and standards were developed, such that IT governance has become a solid cornerstone of the profession. (Details about IT governance are given in Chapter 11.) After the turn of the century, a similar need became evident in the burgeoning field of project management. The evolution has been from the management of single projects to multiple projects and then to the development of project management offices, corporate project management offices, and chief project officers. To gather all this under one governing roof, Enterprise Project Governance is making the scene.
From Corporate Governance to Enterprise Project Governance
Enterprise Project Governance helps fill the voids left in loosely woven corporate governance policies, primarily with respect to transparency, accountability, and responsibility. Effective EPG ensures that corporate initiatives and endeavors are appropriately defined with respect to policies and accountability.
More importantly, EPG is a natural evolution in organizations that wrestle with countless demands for new projects to be completed within tightened time frames, at lower cost, and with fewer resources. Indeed the pressures from faulty corporate governance have influenced companies' trends to include EPG policies, but in fact the need for EPG is simultaneously becoming apparent as the world becomes increasingly projectized, with more and more projects clamoring for attention. The demand to undertake, manage, and complete multiple projects creates a need to provide greater governance and structure. Whereas corporate governance also includes the concerns of the ongoing organization with its status quo activities and operational issues, EPG focuses on new and changing factors, thus on the projectized parts of organizations.
The book provides definitions and insights regarding the essence, variations, and myriad subtleties of EPG. Capsule summaries of each chapter follow:
Chapter 2: The Essence of Enterprise Project Governance. The need for the integration of projects with the business environment led the Association for Project Management in the United Kingdom to spotlight the need for improved project governance. This concept evolved to a broader view that encompasses portfolios and programs and that is called Enterprise Project Governance. It is a framework extending from corporate governance with a set of principles and key components: strategic alignment, risk management, portfolio management, organization and stakeholder management, performance evaluation, and business transformation.
Excerpted from Enterprise Project Governance by Paul C. Dinsmore Luiz Rocha Copyright © 2012 by Paul Dinsmore and Luiz Rocha. Excerpted by permission of AMACOM. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
1. Introduction to Enterprise Project Governance
2. Th e Essence of Enterprise Project Governance
3. Linking Strategy to Portfolio
4. Risk Management: Dealing with Uncertainty
5. Project Portfolio Management: Th e Right Combination of the Right Projects
6. Turning Strategy into Reality
7. Organizing for Enterprise Project Governance
8. Stakeholder Management and the Pivotal Role of the Sponsor
9. EPG Performance: Beyond Time, Cost, and Quality
10. EPG in Mega Projects, Joint Ventures, and Alliances
11. EPG for Diff erent Types of Projects
12. The EPG Plan: A Roadmap to Transformation and Success
13. Challenges and Roadblocks
Appendix: Sarbanes-Oxley Compliant Projects
Notes and Sources
Abbreviations and Acronyms
About the Authors