Only in fairytales are emperors told they are naked

3G A M M A I N S I G H TS

ONLY IN FAIRYTALES ARE EMPERORS TOLD

THEY ARE NAKED

Andy Jones

Many organisations don’t do effective project governance. Often, conversations like this are heard up and down the corridors of our businesses: “I don’t care what the report says. I don’t care if you think that you’re going to deliver late with less functionality. That’s not going to happen. You will be on time, and it will work. Now stop wasting time in my office and go make it happen.”

April 2015

MANY ORGANISATIONS DON’T DO EFFECTIVE PROJECT GOVERNANCE

Often, conversations like this are heard up and down the corri-dors of our businesses:

I don’t care if you think that you’re going to deliver late with less functionality. That’s not going to happen. You will be on time, and it will work. Now stop wasting time in my office and go make it happen.

12 months later the project is canned after being £4m over budget, £16m spent and delivering zero benefits. Of course it’s not always as harsh and bullish as this. Equally harmful is the ‘nice’ conversation:

This project is pushed for time. The deadline is very tight. The team is a little smaller than ideal, so we’re going to have to work efficiently and hard. But if we can pull together we can deliver this.

The project delivers 35% late and the attrition rate of team members in the project is 25%. There are 101 other examples — from a business case that doesn’t add up, to an incapable delivery team, or huge risks not mitigated or understood prior to project kick off. Up and down the country projects are going wrong, billions are wasted and governance is not preventing it.

12 months later the project is canned after being £4m over budget, £16m spent and delivering zero benefits.

WHY GOVERNANCE FAILSMany organisations that think they have governance often don’t. There’s a great quote by Warren Buffett which pinpoints what’s really happening.

In some mergers there are truly synergies – even though often times the acquirer pays too much for them – but at other times the cost and revenue benefits that are projected prove illusion-ary. Of one thing, however, be certain. If a CEO is enthused about a particularly foolish acquisition, both his internal staff and his outside advisors will come up with whatever projections are needed to justify his stance. Only in fairy tales are emperors told that they are naked.

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It might not be the CEO and might not be a merger, but whatever your project and whatever your organisation, political power is at play. The Emperor is naked and no one has told him.

Part of the reason why governance often fails, is that there is scant agreement on what project governance actually is. The Association of Project Management advocates 11 facets of project governance, but Human Systems only eight. Totally Opti-mised Projects rack the number up to 26, whilst ITGovernance.co.uk scale it down to only six and the HM Treasury have one more at seven.

PwC took a different approach in a survey, asking those respon-sible for project governance what their roles and responsibilities were and what project governance meant. Of 110 people ques-tioned only two could answer the question.

There are two differing approaches to implementing project governance – top down and bottom up.

DELIVERING GOVERNANCE TOP

DOWN: THE BOARD APPROACH

OBJECTIVESRather than try to define project governance, the relevant ques-tion is what should good governance achieve?

The list should be individual for each organisation and depend-ent on how they deliver projects and what goes wrong in those projects. But for most organisations the list goes something like this:

a. Stop things going wrong (and this can normally be narrowed down still further to cost and time overruns).

b. Deliver the right benefits.c. Avoid non-value-adding projects.d. Make sure the right ‘big’ decisions are made.

COMPOSITIONNow that we have defined the objectives of the governance function, we need to determine who sits on the governanceboard. There are three simple rules when setting up a govern-ance board:

KEEP IT SMALLGroups often reach decisions at odds with the decision each member would reach as an individual. Individual members often view the group decision as perverse. On top of this, or perhaps because of it, individual members often fail to take responsibil-

ity for a group’s decision. All of these erode effectiveness so a governance board is best kept small. Three is ideal.

KEEP IT SENIORIf anyone in the organisation can say “I don’t care what the gov-ernance board says, here’s what we’re actually going to do” and make that statement stick, either the wrong people are on the governance board or the right level of sponsorship is missing. The board needs to have the power to make decisions which do not need to be ratified. If the governance board can’t cancel the organisation’s large projects, it’s at the wrong level.

NO PROJECT STAKEHOLDERSIf stakeholders sit on the governance board, the politics are still at play. Even better – have external third parties sit on the governance board.

AGENDAWith clear governance objectives and a board, what is the agenda?

Long-term: The board needs a long term view. Short-term project decision making leads to bad decisions. The board is not the slave of budgeting cycles, or individual objectives or bonus plans. They take the long-term view of the project.

Negative not positive: The board should assume every project is going to fail. It’s then up to the project owners to show them the data that will prove the project will succeed. If they can’t, the project should be stopped. Now.

Which 30% is wrong? In most organisations at least 30% of their projects overspend and/or underdeliver. If the governance board isn’t stopping 30% of projects, it may not be carrying out its remit successfully.

The board should assume every project is going to fail. It’s then up to the project owners to show them the data that will prove the project will succeed. If they can’t, the project should be stopped. Now.

The implementation of the agenda can be a simple list of questions. Every project should have to answer those questions and if the answer isn’t appropriate, the project stops. The list of questions is particular to the organisation but should include things such as whether the project benefits are still worthwhile to achieve? Will they be achieved? How the project compares to 4

lessons learnt? What’s the Plan B? Projects without a satisfac-tory answer are stopped.

And finally, a key point to ensure the politics don’t creep back in. Publish the decisions made and the reasons why. Publish the data that informed the decisions. This will educate and inform those responsible for your project portfolio and will create a culture of openness and honesty which is essential in project governance.

An advantage of this approach is that it makes a differenceday one. The changes are quick, radical and obvious for allto see. But they’re also blunt (sometimes too blunt) andrequire strong executive support which may not exist.

DELIVERING GOVERNANCE BOTTOM UP: THE ‘GOOD PROJECT’ APPROACH

A bottom up approach to project governance is the process of fixing the problems of poor projects at source. It’s about definition, common metrics, project maturity and intervention. In organisations where projects are OK but can be improved the bottom up approach can deliver good results.

A bottom up approach to project governance is the process of fixing the problems of poor projects at source. It’s about definition, common metrics, project maturity and intervention.

COMMON LANGUAGE AND METRICSToo often in projects subjectivity makes it hard for those tasked with governance to really understand what they should be doing. Project A is rated red, Project B is rated amber and Pro-ject C is rated green – but which is really the project in trouble? Without a common objective language and objective metrics, it’s hard to know.

Instead often you hear, “If I rated my projects according to the definitions, mine would be permanently red” or “I set my project to amber this month so that the sponsor takes notice and answers the questions I ask”.

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“ ABSOLUTELY KEY IN THIS ENDEAVOUR ARE THE FRANKNESS AND OPENNESS OF MIND WITH WHICH ISSUES ARE DISCUSSED AND TACKLED BY ALL DIRECTORS” UK CORPORATE GOVERNANCE CODE 2010.

Creating a strong culture of common metrics avoids these prob-lems. But don’t underestimate how long this can take – espe-cially in a very politically charged company.

KNOW WHICH PROJECTS NEED SUPPORTWith common metrics, it’s easier to identify the projects that need support. Projects can be graded based on their size, com-plexity, risk profile, budget and more and given PMO support according to these criteria. Again, this is a focus of education, of changing the causes. It takes time, but done properly it works.

IMPROVE CAPABILITYWith projects understood and interventions in place (where needed) improvement across the portfolio is achieved by developing maturity in project managers, processes and also the stakeholders and sponsors guiding and paying for projects.

PREVENT PROBLEMSAs maturity improves support is provided to projects before problems arise. The common metrics, the understanding of capabilities and the PMO work together to target early intervention.

ABOUT THE AUTHORAs 3gamma UK’s current Head of Consulting Andy Jones has over 20 years experience in IT Project and Programme Man-agement, mainly in life sciences. He has a proven track record covering infrastructure, application development, business intelligence, upgrades and implementation projects, network infrastructure design and implementation, risk assessment and disaster planning.

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CONCLUSION

In really focused organisations both top down and bottom up governance is used. This is a powerful combination that ensures alignment and performance. It is effective when a frank and honest discussion exists around project success and decisions are made with no other agenda.

A note on stopping projects

Both top down and bottom up governance advocate stopping projects. This is not necessarily a terminal decision. If a project is wrong or if it’s not going to deliver, it should be stopped. But if it can be changed, better managed, better controlled, permanently restructured and able to convince that it will deliver benefit, it should be allowed to restart.

A final note on project managers

Some project managers shine and in my experience these individuals ensure great governance around their projects. Regardless of top down / bottom up they ensure the project has sponsorship and that good, well informed decisions are made on behalf of the project including stopping the project if the benefits to be achieved are no longer needed or will not be achieved. Ultimately, the governance regime is secondary to truly good project management.

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3G A M M A I N S I G H TS

ABOUT 3GAMMA3gamma is a leading professional services firm focusing on IT management. As an independent specialist in IT management, 3gamma provides advisory, consulting services and fact-based insights to many of the world’s most respected companies. 3gamma operates globally from offices across the Nordics and UK. 3gamma is a knowledge firm that bases its expertise of six core capabilities:

• IT strategy and governance• IT sourcing lifecycle• IT legal advisory• IT risk and assurance• IT operational excellence• IT project management and delivery

3gamma Insights brings leading-edge thinking at the intersection of IT and business, illuminating central topics relevant to CIOs and decision makers.

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