The important role of project governance
To some project managers ‘governance’ is an overhead, an unnecessary level of bureaucracy. “I can bring my projects in without all of that nonsense!” is their general view.
True, they often can, provided that these projects are narrowly defined and only involve a few stakeholders. But once the level of complexity increases, on any dimension, a lack of project governance begins to take its toll.
Think about it. If you and a few mates are going to build a shed, that’s pretty simple and can be done without any ‘governance’.
However, if the project is to build a block of flats, which involves design and fit-out options, council approvals and inspections as well as an array of tradesmen — the task is much more complex.
If you merely want to get the block of flats built within time and budget (especially budget), you can mostly leave it to the project manager/builder.
However, if you are doing this as a commercial concern then, in addition to building the block of flats, you’ll also need to assess the market, set the sale price, deal with agents/buyers and govern the whole end-to-end event so as to maximize your returns.
If the flats don’t sell or sell for a lower price than expected, unless it is due to sub-standard construction, this is not the project manager’s fault, it’s a governance/owner issue.
Extending this analogy, the governance team has to focus on maximizing the commercials — the nett business value of the project. This requires a broader perspective than just ‘building the flats’.
As soon as a project’s complexity or scale increases, effective governance becomes more important and needs to become formal.
Unintended consequences
But if governance is poorly done, this is not always immediately obvious as the downstream impacts are either delayed or can appear in different guises.
For example, a cost saving project can be ‘successfully delivered’ having taken, say, $1m in costs out of an operation. But unless this ‘saving’ is genuine and consistent across the end-to-end process
- additional costs may arise elsewhere in the process (which then need to be tackled by another cost-saving project!)
- sales/volumes may declined due to poor/worse service or performance
- staff productivity can decline as less staff are expected to do more
- key knowledge can be lost as people leave that increases the subsequent costs of dealing with problems.
And so on.
The point is that, when you are introducing change you’re altering an interwoven web of processes. Changing any points in these processes without cognition of the ramifications across the whole process web usually creates more cost and complexity elsewhere.
Yet business managers will cry, “But our approach works! Each year the cost savings targets are met!”
Yes, but what opportunities have been lost or missed in the process?
The need to win both the battles and the war
Research has shown that these ‘successful cost saving projects’ often
- could have been completed in less time and for less cost if done in a planned and governed manner
- would have generated greater value if done as a governed program of work.
For example, an international organization continually focused on cost savings. Year on year the costs were reduced. Labour was replaced by machines. Factories were consolidated. Material usage became more efficient. Complex processes were simplified. The company became a low cost producer, but …
At the end of this effort they
- still had the same market share
- they were making less profit (as their customers took many of the savings)
- they had missed the new, more profitable markets afforded by new technologies
- they were poorly placed to compete on streamlined supply chains (especially as their suppliers hated dealing with them).
They had won the (cost) battle, but lost the (profitability and growth) war.
Effective governance is about winning both the battles and the war.
Effective governance starts with education and training.
