The term “project and program governance has been used quite freely within the project management community. It’s generally known that when a project fails, project governance seems to be the root cause of the failed executed project. The real question is what does project governance mean?
Project governance encompasses all the main elements that make a project successful. It’s important to tailor project governance to an organisation’s particular needs.
The development of project management and therefore the want for project governance
Project management came into being as a discipline in the early 1950s; due to the shift in focus from simply delivering technical specifications at a cost to formalising workflows. The Program Evaluation Review Technique (PERT) was created by the US military in the late 1950s as a technique of linking and prioritising tasks.
From the early 1960s, there was a linkage from the Program Evaluation Review Technique (PERT) to a cost control system whose purpose is to match the spend rate with physical progress. Additionally, there was an addition of the Work Breakdown Structure (WBS) to a project manager’s toolbox. The size of the project will determine the size of the team or organisation needed to execute it.
For the larger project, the delivery teams would need substantial communication with the rest of the business to offer huge assurance that the different work streams were all working together towards accomplishing business objectives.
However, right from the 1970s, project managers start to consider how their projects interacted with the natural environment. For instance, the Bay Arena Rapid Transit (BART) project in San Francisco, California is usually cited as a project where management of the environmental factors became vital to the result of the project. The consequences of poor management of risks and opportunities can be seen in budget overruns, substantial delays, and current operational distress.
Presently, the research on project management has encroached into both the public and private sectors. Organisations now see the need to adopt a governance process to assess the viability and value of undertaking fresh projects. A detailed project plan was no longer appropriate as organisations are required to determine the short and long term effects of undertaking a fresh project before it commissioning.
In the absence of a governance process, companies will face the following challenges which will lead to numerous negative effects. These include:
1. Project Failure
Based on research, the cause of 92% project failure is managerial incompetence. Project Managers must ensure that the process by which a project will be managed is properly mapped out and communicated as part of the project governance framework if the objective is to set project teams up for success. Poor management and decision-making can be a catalyst for project failure at any point from the beginning to the end. However, problems erupt with an ineffective governance process.
Research has shown that causes of capital project failure include; 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 organisations, and so on.
Possessing a detailed and well-established governance process can aid an organisation to prevent the most common issues that cause projects to fail. It can lead to positive outcomes such as; suitable resources are selected to lead and work on the project, there will be an open line of communication among all parties involved, and so on.
2. Wearing down of Profit Margins
Presently, clients are getting more and more impatient about the delivery of complex projects. There are contractual penalties for missing deadlines and poor delivery of projects. Companies are gradually taking advantage of such issues. When such things happen, the business will quickly start to see its profit margin wearing down.
3. Potential Litigation
If the financial, contractual, and information elements of projects are being badly managed, companies could be leaving themselves open to litigation as a consequence. Additionally, poor handling of complaints about important emails, clauses, or drawings can also cause potential litigation.
4. Damages to Reputation
In the absence of project governance, the services provided to clients could range from acceptable to not being able to deliver the project as a whole. The consequence of this is an effect on the organisation’s reputation. Current success and growth need to be supported by a powerful and positive reputation.
In this present age, having an efficient governance process is important. Projects are getting too complex, having too many mobile parts, and potential risks thus organisations need to create a formalised governance process. A single failed project can result in millions of dollars in lost profit, a dent to an organisation’s reputation, and finally long-term instability. Project Managers must implement a governance process to maintain steady growth and revenue.