How to setup a good project

governance structure

Frank Smits

Initio Brussels

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Contents
How to setup a good project governance structure ................................................................................ 1
Initio Brussels ............................................................................................................................................ 1
Article summary.................................................................................................................................... 3
What is governance? ............................................................................................................................ 3
Problem statement: lack of organisational knowledge on project governance .................................. 4
Project governance ............................................................................................................................... 4
Purpose ............................................................................................................................................. 4
Principles........................................................................................................................................... 5
Roles.................................................................................................................................................. 7
The project manager ........................................................................................................................ 8
Project stakeholders ......................................................................................................................... 8
Steering Committee .......................................................................................................................... 8
Tasks and elements of project governance ...................................................................................... 9
Traditional governance versus Agile/Scrum governance ................................................................... 10
Final Thoughts: Why Is Project Governance Critical to the Success of a Project? ............................. 11
Author ..................................................................................................................................................... 12
About Initio ............................................................................................................................................. 12
Contact .................................................................................................................................................... 13

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Article summary
This article describes project governance, its role within the organization and the principles, tasks and
elements of good governance. It deals with the questions:

• What is governance? Why is it needed?

• What are the principles of good governance?
• How to assure good governance structures (roles, tasks and elements), can be easily setup, accepted
and maintained?
• Why is governance critical to project success?

Finally, it looks at the traditional governance structure versus agile/scrum governance and describes
some hands-on tips and tricks to implement good governance at every stage of your project.

What is governance?
The Cambridge dictionary describes governance as ‘the way that organizations or countries are
managed at the highest level, and the systems for doing this’, and also: ‘the activity of governing
something’.
Translating this into our world of business organisations and project- and/or program management, a
more precise definition could be: ‘Establishment of policies, and continuous monitoring of their
proper implementation, by the members of the governing body of an organization. It includes the
mechanisms required to balance the powers of the members (with the associated accountability),
and their primary duty of enhancing the prosperity and viability of the organization’.

Hence project governance is the management framework within which project decisions are made.

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Problem statement: lack of organisational

knowledge on project governance
Project governance is a critical element of any project since typically an organisation usually has in
place a ‘static’ governance model through a traditional organization chart but has seldom defined an
equivalent ‘dynamic’ or temporary framework to govern the development of its ongoing projects.
Typically, a company’s organization chart provides a good indication of who in the organization is
responsible for any particular operational activity the organization conducts. But not all organisations
have specifically developed a project governance policy or have thought about a proper governance
structure upfront when starting up their projects.

Project governance
Purpose
The purpose of project governance is to provide a decision-making framework that is logical, robust
and repeatable to govern any type of project or program, and independent of the underlying usage of
project methodology. In this way, an organization will have a structured approach for conducting both
its business as usual activities and its business change, or project-activities.

Project governance will formalise the ‘what if’ scenarios in case of issue management (like budget
restrictions, unforeseen project events, scope creep, ...) and decision management. It will resolve the
uncertainties of ‘who can decide what’ in a temporary environment, and it should clarify the roles of
all defined and designated stakeholders.

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Principles
Good project governance is supported by a set of guiding principles:

Principle 1: Assure single point of accountability for the project success

Every project needs a clear leadership to assure success. The concept of a single point of accountability
is the first principle of effective project governance.
However, it is not enough to nominate someone to be accountable – the right person must be made
accountable and endorsed/empowered by the senior management to hold sufficient authority within
the organisation.

Principle 2: Separate project ownership from stakeholder(s)

It is imperative that the project lead defines a stakeholder map of all its stakeholders and a project
specific governance structure for a formal decision process along the project lifecycle.
The only proven mechanism to ensure that projects meet customer and stakeholder needs, while
optimising value for money, is to allocate the project ownership to a specialist party, that otherwise
would not be a stakeholder to the project. This is principle No. 2 of project governance.

The Project Owner is engaged under clear terms which outline the organisations’ key result areas and
the organisations’ view of the key project stakeholders. Often, organisations establish a Governance of
Projects Committee, which identifies the existence of projects and appoints project owners as early as
possible in a project's life, establishes Project Councils which form the basis of customer and
stakeholder engagement, establishes the key result areas for a project consistent with the
organisations’ values, and oversees the performance of projects. These parameters are commonly
detailed in a Project Governance Plan which remains in place for the life of the project (and is distinct
from a Project Management Plan which is more detailed and only comes into existence during the
development of the project).

Projects may have many stakeholders and an effective project governance framework must address
their needs. The next principle deals with the manner in which this should occur:
Principle 3: Ensure separation of stakeholder management and project decision making activities.
The decision-making effectiveness of a committee can be thought of as being inversely proportional to
its size. Not only can large committees fail to make timely decisions, those who do are often ill-
considered because of the particular group dynamics at play.

As project decision making forums grow in size, they tend to morph into stakeholder management
groups. When numbers increase, the detailed understanding of each attendee of the critical project
issues reduces. Many of the stakeholders tend to attend not to make decisions but as a way of finding
out what is happening on the project. Not only is there insufficient time for each person to make their

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point, but those with the most valid input must compete for time and influence with those with only a
peripheral involvement in the project. Further not all present will have the same level of understanding
of the issues and so time is wasted bringing everyone up to speed on the particular issues being
discussed. Hence, to all intents and purposes, large project committees are constituted more as a
stakeholder management forum than a project decision making forum. This is a major issue when the
project is depending upon the committee to make timely decisions.

There is no question that both activities, project decision making and stakeholder management, are
essential to the success of the project. The issue is that they are two separate activities and need to be
treated as such. This is the third principle of effective project governance. If this separation can be
achieved, it will avoid clogging the decision-making forum with numerous stakeholders by constraining
its membership to only those select stakeholders absolutely central to its success.
There is always the concern that this solution will lead to a further problem if disgruntled stakeholders
do not consider their needs are being met. Whatever stakeholder management mechanism that is put
in place must adequately address the needs of all project stakeholders. It will need to capture their
input and views and address their concerns to their satisfaction. This can be achieved in part by chairing
of any key stakeholder groups by the chair of the Project Board. This ensures that stakeholders have
the project owner to champion their issues and concerns within the Project Board.

Principle 4: Ensure separation of project governance and organizational governance structure

Project governance structures are established precisely because it is recognized that organizational
structures do not provide the necessary framework to deliver a project. Projects require flexibility and
speed of decision making and the hierarchical mechanisms associated with traditional organization
charts do not enable this. Project governance structures overcome this by drawing the key decision
makers out of the organization structure and placing them in a forum thereby avoiding the serial
decision-making process associated with hierarchies.

Consequently, the project governance framework established for a project should remain separate
from the organization structure. It is recognized that the organization has valid requirements in terms
of reporting and stakeholder involvement. However dedicated reporting mechanisms established by
the project can address the former and the project governance framework must itself address the
latter. What should be avoided is the situation where the decisions of the steering committee or project
board are required to be ratified by one or more persons in the organization outside of that project
decision making forum; either include these individuals as members of the project decision making
body or fully empower the current steering committee/project board. The steering committee/project
board is responsible for approving, reviewing progress, and delivering the project outcomes, and its
intended benefits, therefore, they must have capacity to make decisions, which may commit resources
and funding outside the original plan. This is the final principle of effective project governance.

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Roles
PROJECT SPONSOR
A key role in project governance is that of the project sponsor. The project sponsor has three main
areas of responsibility which are to the board, the project manager and the project stakeholders.

The project sponsor engages with stakeholders, governs stakeholder communications, directs client
relationship, directs governance of users, directs governance of suppliers and arbitrates between
stakeholders.

BOARD
The board has overall responsibility for governance of project management but is usually not involved
in detailed project follow up. It consists of senior managers/executive members and can be called upon
in case of serious issues such as critical decision-making needs, additional budget allocations, urgent
risk issues, contingency measures etc...

All projects have an approved plan containing authorization points, at which the business case is
reviewed and approved. Decisions made at authorization points are recorded and communicated.
Members of delegated authorization bodies need to 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 authorization
decisions.

The board or its delegated agents decide when independent scrutiny of projects and project
management systems is required and implement such scrutiny accordingly.

For the board, the sponsor provides leadership on culture and values, owns the business case, keeps
the project aligned with the organisation's strategy and portfolio direction, governs project risk, works
with other sponsors, focuses on realisation of benefits, recommends opportunities to optimise
cost/benefits, ensures continuity of sponsorship, provides assurance and provides feedback and
lessons learnt.

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The project manager

The project manager owns the day-to-day responsibility of the project. He manages the milestones,
and information flows that inform decision makers:
certain key documents that describe the project, foremost of which is the business case
regular reports on the project
issues and risks escalation
The sponsor and the project manager align closely on timely decisions, clarify the decision-making
framework, clarify business priorities and strategy, communicate on business issues, deal with
provisioning of resources, engender trust, manage relationships, and promote ethical working within
the project team.

Project stakeholders
Your project stakeholders are usually mid- to senior level management and hand-picked by the project
sponsor.

A stakeholder is either an individual, group or organization who is impacted by the outcome of

a project. They have an interest in the success of the project and can be within or outside the
organization that is sponsoring the project. Stakeholders can have a positive or negative influence on
the project and might have their own personal agendas to deal with, therefore stakeholder
engagement is crucial. The first step is to identify all the relevant stakeholders. This seems like a
daunting and asinine task but it is actually key. If one stakeholder is left out, this can derail the entire
project and can have a detrimental impact.

Steering Committee
Project sponsor, project manager and project stakeholders usually come together at the Steering
Committee - to be organized by the project manager on a regular basis:

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Tasks and elements of project governance

Project governance will:
• Outline the relationships between all internal and external groups involved in the project
• Describe the proper flow of information regarding the project to all stakeholders
• Ensure the appropriate review of issues encountered within each project
• Ensure that required approvals and direction for the project is obtained at each appropriate stage of the
project.

Important specific elements of good project governance include:

• A compelling business case, stating the objects of the project and specifying the in-scope and out-of-
scope aspects
• A mechanism to assess the compliance of the completed project to its original objectives
• Identifying all stakeholders with an interest in the project
• A defined method of communication to each stakeholder
• A set of business-level requirements as agreed by all stakeholders
• An agreed specification for the project deliverables
• The appointment of a project manager
• Clear assignment of project roles and responsibilities
• A current, published project plan that spans all project stages from project initiation through
development to the transition to operations.
• A system of accurate upward status- and progress-reporting including time records.
• A central document repository for the project
• A centrally-held glossary of project terms
• A process for the management and resolution of issues that arise during the project
• A process for the recording and communication of risks identified during the project
• A standard for quality review of the key governance documents and of the project deliverables.

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Traditional governance versus Agile/Scrum

governance

Establishing project governance is not a simple task. Significant investment on this task needs to be
made when embarking on a new project. It is often challenging to quantify what the benefits are when
it comes to investing in the creation of the project governance framework.
While the traditional governance tends to put in place a rather formal governance structure while Agile
promotes in principle a more self-steering control of the project team members, it is in my opinion wise
to use common sense in setting up a proper governance for your project, irrespective of the underlying
methodology used. These are some recommendations to do so:

• Assure that all your defined governance bodies are actively involved and can add value to your project.
Do not over-engineer your governance with entities that are only there for political reasons, but do not
contribute value.
• Setup your governance structure (steerco members, issue management, governance meeting agendas)
as ‘lean’ as possible, and trust your project team in decision making abilities until proven otherwise
(Agile principle)
• Use common sense to manage governance agenda’s: it’s always difficult to have everyone aboard for
every (governance) meeting – use the principle to confirm the meeting if at least half of the invitees
have accepted.
• Manage your stakeholders carefully – ultimately, they will make or break the project in case of red-zone
issues.
• Always take time to de-escalate team member issues, do not neglect or delay.

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Final Thoughts: Why Is Project Governance

Critical to the Success of a Project?

Establishing a good project governance is not a simple task. Significant investment needs to be made
when embarking on a new project. It is often challenging to quantify what the benefits are when it
comes to investing in the creation of the project governance framework. The following are four key
benefits of project governance:
• Single point of accountability;
• Outlines roles, responsibility and relationships among project stakeholders;
• Issue management and resolution; and
• Information dissemination and transparent communication.

Project governance provides a single point of accountability. This mandates clarity and fosters
consistency of decision making for the lifecycle of the project. By appointing one focal point of
accountability, the individual's primary focus will be on delivering on the project's objectives and will
be not be deterred for the duration of the project. This does not mean that there will be “one throat
to choke,” but one person will be responsible for the direction and focus of the project and having
multiple individuals accountable will not blur this.
In addition, project governance defines and clearly articulates structured roles, responsibilities and
accountabilities within the project, which also facilitates decision making. This is critical when the
project manager has a deviation in scope, budget, time, resources, or quality, or when a risk has
presented itself. Project governance defines whom these issues impact and how to deal with the
impact.
The governance framework will provide ’guidelines’ on how to deal with issues on the project. Not
only does it define to whom the issues impact, but also it details mechanisms for how to deal with the
issues. It ensures that the appropriate review on the issues is done and who are the key points of
contact for addressing and approving any deviations in the project requirements. Project governance
provides direction and defines decision-making procedures and metrics for validating impacts to the
project. It also enables the project team to deliver on requirements and creates a forum for issue
resolution to occur in a timely manner.

Finally, project governance provides a vehicle for information gathering and reporting to all
stakeholders. This framework ensures that the communication plan is well defined, updated and
executed. It also facilitates consistent, standardized and transparent reporting. This promotes nibble
status updates on productivity as well as communicates and addresses stakeholder expectations.

Frank Smits, Initio

[email protected]

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Author
Frank Smits is a managing consultant at Initio Belgium, with over 20 years of hands-on project-,
program management and business case management experience. He is also a certified Agile/Scrum
product owner.

About Initio

Initio is a business consultancy firm specialized in the Financial Industry.

Our offering is focused on business consultancy combined with project methodology in order to assist
our clients on the whole project cycle.

We have offices in Brussels, Luxembourg & Geneva. Through close collaboration, we can react swiftly
on a wide scope of services in order to meet client needs rapidly with the highest industry standards.

Initio is part of the French group Square Management.

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Contact

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8030, Strassen Brussels, 1200 Geneva, 1204
Luxembourg Belgium Geneva

Tel: +352 277 239 Tel: +32 (0)2 669 77 44 Tel: +41 (0) 22 591 79 21
Email: [email protected] Email: [email protected] Email: [email protected]

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