Avoid project disasters with good project governance

Some years ago corporate governance became a trending topic. A lack of corporate governance was one of the root causes of the international crisis that started with the Enron case. Companies were exposed to risks without being aware of them. The presence of lots of unknown unknowns brought companies to (the edge of) bankruptcy. The solution was to install proper and objective management reporting systems and processes. Early warnings would inform management in a timely manner about possible risks. Segregation of duties between the performing organization and the controlling body was enforced. The Sarbanes Oxley law was originated in the US to ensure proper corporate governance so cases like Enron could be avoided in the future.

 

Similar to corporate governance, installation of good project governance enables timely identification of major project risks and facilitates management decisions. A well functioning project governance system will drastically reduce the risk of disaster projects. The PRINCE2® project management standard will help install good project governance in the following manners:

  • Segregation of duties between project board and project manager
  • Clear roles and responsibilities of the project board members
  • Definition of tolerances and management by exception

Project board, project succes, Prince2

 

Segregation of duties

While the project manager is responsible for delivering the project within the given constraints (scope, time, cost, quality), the project board is responsible for monitoring the viability of the project, i.e. the business case. PRINCE2® facilitates proper project governance by requiring that project manager and project board cannot consist of the same person(s).

 

Roles and responsibilities of the project board members

PRINCE2® ensures that the triple constraint factors of time, cost, scope (quality) are represented in the project governance system. It is clear that interests of the project board members may be different and sometimes even conflicting. While the user representative wants to have the best product in the shortest possible time, the supplier representative wants to use resources in the most optimal manner. This is a natural unstable equilibrium that will always exist between the project constraints. By clearly defining the roles of the project board, a fragile balance between the constraints can be maintained.

 

Tolerances and management by exception 

As of the start of the project, tolerances for time and budget are clearly defined. The project manager knows exactly where the boundary lies between taking corrective action or escalating to the project board. The project board is ensured of timely warnings in case of deviations beyond tolerances. The project manager feels confident because the work terrain is well defined and there is a well-defined escalation process in case of exceptions.  

 

All three factors together are important for good project governance. Of course, many other factors can lead to project disaster. When managing projects, it certainly helps to have a framework of proven practices at hand. In that sense, a project management certification (e.g. PRINCE2®) will lead to the use of a common language and will thus facilitate project execution.  

Click here to learn more about the PRINCE2® Methodology.