What is governance?
(Manage relationships)
A set of relationships:
-between company’s management, board, shareholders and other stakeholders
(Manage processes)
Provide structure to define:
-company’s objectives
-and how to attain them (structure and resources)
(Control system)
Monitor performance
What is the TRADITIONAL project management view of governance?
Single-project view
Project independency:
- Isolated objectives
- Dedicated team
- Under the control of their own project manager
What is the CONTEMPORARY project management view of governance?
Multi-project view: Portfolio -> Programs -> Projects
Project-based organization:
- Portfolio: strategic, near company’s objective, programs within share common objective (input)
- Program: basket of small/medium projects with interrelated objectives (output)
- Whole > sum of parts
- Share of resources within programs and portfolio
What is strategy? And strategic management?
Direction and scope of a company over the long-term.
Formulation and implementation to achieve strategy.
What are the levels of corporate governance?
Organization/Corporate (strategic objectives)
Project management (governance of project management capabilities)
Portfolios, programs, projects (project governance)
What characterizes a good governance?
Break objectives into manageable steps
Linking projects to the strategy
Senior management support
Engagement with stakeholders
Increasing organizational capability
What are the dimensions for and the governance paradigms?
Dimensions (self-regulation factors)
- Governance orientation: shareholder (short-term) or stakeholder (long-term)
- Control structure/focus: outcomes (accomplish goals) or behavior (follow processes)
Paradigms
Shareholder | Stakeholder
Outcome | Flexible economist | Versatile artist
Behavior | Conformist | Agile pragmatist
(Bonus) Clan control: foster practice through employees desires to be part of a clan. (Both outcome and behavior)
What is the usefulness of governance paradigms?
Link corporate governance with project level, setting limitations for project governance
Generic Governance Model
Board of directors: provide strategy and objectives
Steering committee: govern project execution
-Composition: board of directors, PM, sponsor/client, other stakeholders
Middle management: provide resources
Project Management Office (PMO): oversee projects and PM
- Collect performance data (reports)
- Provide consulting services
- Knowledge sharing
What are the project governance roles?
Client: external, give specific objective
Sponsor: internal, resource allocation
PM
(bonus) If internal project, Client = Sponsor
What is the Principal-Agent relationship in governance?
Principal (sponsor) depends on the agent (PM) to take actions on principal’s behalf.
What are the problems of a Principal-Agent relationship?
Adverse Selection Problem:
- Lack of information about PM competences and interests
- Asymmetric information about the project and decisions
Moral Hazard Problem:
- PM may maximize their profit from the project over client’s
- Bounded Rationality: limit PM ability to work on everyone’s best interest
What are the consequences of the Principal-Agent relationship problems?
Increase Agency/Transaction Costs
- Additional cost for the Sponsor to manage the PM
- Structures to minimize conflict of interest: contracts, communication, bonding costs (win trust and support), residual losses (difference in outcomes and needs)
