Project Management Governance Model Template and Governance PMO
The development of project management and the need for project governance
As a discipline project management has come a long way since the early 1950s when the focus shifted from simply delivering technical specifications at cost to formalizing workflows. The Program Evaluation Review Technique (PERT) was developed by the US military in the late 1950s as a method of linking and prioritising tasks.
The early 1960s saw the linking of Program Evaluation Review Technique (PERT) to a cost control system, which sought to match spend rate with physical progress. The 60salso saw the addition of the Work Breakdown Structure (WBS) to a project manager’s toolbox. The decade saw increased research and interest in project management. Several studies were published in the latter half of the 1960s, which concluded that the larger and more complex the project, the larger the team or organisation needed to be to deliver it. Mega projects could be broken down into sub-projects of distinct work streams or elements. These large project delivery teams would require significant communication with the rest of the business-as-usual organisation in order to provide greater assurance that the various work streams were all working collaboratively towards achieving business objectives.
Project management developed further in the 1970s as project managers began to consider how their projects interacted with the natural environment. For example, the Bay Area Rapid Transit (BART) project in San Francisco, California, is often cited as a project where management of the environmental factors became crucial to the outcome of the project. Poor management of risks and opportunities presented by environmental factors manifest itself in budget overruns, significant delays and ongoing operational distress.
As research on project management continued to advance and gain more recognition in both the public and private sectors, organizations realized they need to adopt a governance process to evaluate the viability and value of undertaking new projects. A detailed project plan was no longer suitable, organizations needed to determine the short and long-term consequences of undertaking a new project before it began.
Without a governance process in place, companies can face many challenges that lead to a number of negative consequences:
92% of project failures are due to managerial incompetence. If the goal is to set project teams up for success, then managers must ensure that the way a project will be managed is mapped out and communicated as part of the project governance framework. Projects can fail as a result of poor management or decision-making at any point from its inception to its execution. Teams often get the blame for botched projects, but oftentimes, problems start with an ineffective governance process.
There has been considerable research into the causes of capital project failure. One source, the Office of Government Commerce (OGC), has published a best practice document about construction projects in the UK public sector. They determined four main causes of failed projects:
- Lack of skills and proven approach to project management and risk management.
- Lack of understanding of, and contact with, the supply industry at senior levels in the organisation.
- Too little attention to breaking development and implementation into manageable steps.
- Lack of effective project team integration between clients, the supplier and the supply chain.
Having a thorough, well established governance process can help an organization mitigate the most common issues that cause projects to fail. An effective governance process can lead to several positive outcomes: appropriate resources are selected to lead and work on the project, team members, business sponsors, project managers, resource managers, vendors and all other stakeholders have open lines of communication through the duration of the project, development and implementation stages of projects are well thought out.
Erosion of Profit Margins
The expectations of clients are changing constantly. They want the delivery of more complex projects more quickly. Contractual penalties for missing deadlines and not delivering against client expectations are becoming a common hoop for firms to jump through. Those businesses that do not meet expectations or deliver on their contractual requirements will quickly start to see their profit margins affected.
How are the financial, contractual and information elements of projects being managed? Do leaders know what is needed to be delivered and when, are teams 100% sure that they are working off the latest drawing, model or contract? How is the monitoring and managing project communications handled, ensuring team and contractor collaboration? Could crucial emails, clauses or drawings be located easily so that the response to complaints and other matters arising can be handled competently? If the gaps are not closed around how projects are governed, companies could be leaving themselves open to litigation as a result of mistakes or lost information/communication.
Damages to Reputation
Without project governance in place, or the presence of poor project governance, the experience that is offered to clients could range from satisfactory to not being able to deliver the project at all. This not only puts the company at risk of facing the aforementioned issues, but it could have a lasting and negative impact on the organisation’s reputation. Ongoing success and growth needs to be supported by a strong and positive reputation.
Take Away for Project Managers
In this day and age, having an effective governance process is absolutely essential. Projects are too complex, have too many moving parts, and potential risks for organizations not to create formalized governance processes. One botched project can result in millions of dollars in lost revenue, a hit to an organization’s reputation and ultimately long-term instability. Project Managers as well as company executives must implement a governance process if they wish to maintain steady growth and revenue.