Project governance is the management framework within which project decisions are made.

Project
governance is a critical element of any project since while the accountabilities and responsibilities
associated with an organization’s business as usual activities are laid down in their organizational
governance arrangements, seldom does an equivalent framework exist to govern the development of
its capital investments (projects). For instance, the organization chart provides a good indication of
who in the organization is responsible for any particular operational activity the organization
conducts. But unless an organization has specifically developed a project governance policy, no such
chart is likely to exist for project development activity.

Therefore, the role of project governance is to provide a decision making framework that is logical,
robust and repeatable to govern an organization’s capital investments. In this way, an organization
will have a structured approach to conducting both its business as usual activities and its business
change, or project, activities.

Three pillars of project governance

The decision making framework is supported by three pillars:

 Structure

This refers to the governance committee structure. As well as there being a Project Board or Project
Steering Committee, the broader governance environment may include various stakeholder groups
and perhaps user groups. Additionally, there may be a Program Board, governing a group of related
projects of which this is one, and possibly some form of portfolio decision making group. The
decision rights of all these committees and how they relate must be laid down in policy and
procedural documentation. In this way, the project’s governance can be integrated within the wider
governance arena.

 People

The effectiveness of the committee structure is dependent upon the people that populate the various
governance committees. Committee membership is determined by the nature of the project - other
factors come into play when determining membership of program and portfolio boards - which in
turn determine which organizational roles, should be represented on the committee.

 Information

This concerns the information that informs decision makers and consists of regular reports on the
project, issues and risks that have been escalated by the Project Manager and certain key documents
that describe the project, foremost of which is the business case.

Core project governance principles

Project governance frameworks should be based around a number of core principles in order to
ensure their effectiveness.

Principle 1: Ensure a single point of accountability for the success of the project

The most fundamental project accountability is accountability for the success of the project. A project
without a clear understanding of who assumes accountability for its success has no clear leadership.
With no clear accountability for project success, there is no one person driving the solution of the
difficult issues that beset all projects at some point in their life. It also slows the project during the
crucial project initiation phase since there is no one person to take the important decisions necessary
to place the project on a firm footing. The concept of a single point of accountability is the first
principle of effective project governance.
However, it is not enough to nominate someone to be accountable – the right person must be made
accountable. There are two aspects to this. The accountable person must hold sufficient authority
within the organization to ensure they are empowered to make the decisions necessary for the
project’s success. Beyond this however is the fact that the right person from the correct area within the
organization be held accountable. If the wrong person is selected, the project is no better placed than
if no one was accountable for its success. The single person who will assume accountability for the
success of the project is the subject of Principle 2.

Principle 2: Service delivery ownership determines project ownership

Organizations deliver services and utilize assets as platforms for the delivery of these services. It is
therefore critical that the assets delivered by the project meet the service delivery needs of the
organization. If the project outputs do not support service delivery needs, as detailed in the business
case, to be met in full, the project has to some degree failed – it has not achieved optimum value for
money.

The only sure method of ensuring project outputs meet service delivery needs is for ownership of the
project and its business case to reflect service delivery ownership. This is the second principle of
effective project governance.

The organization chart is normally sufficient to identify who in the organization is accountable for the
delivery of the service that the project will enable. It is important that the project owner, in their
service delivery role, is as close to the service being delivered as possible. The corollary to this is that
the ownership of the project does not reside with those delivering the asset. While the asset may be
central to the provision of the services, it does not in itself constitute the service. This concept has
implications in important aspects of the project. For instance, a service delivery focus necessitates a
whole-of-life cost perspective since the service itself will have an associated ongoing, post-project,
operational cost. A service delivery focus also recognizes that at commissioning the asset must
integrate into the existing service regime. On the other hand if a project is viewed as delivering an
asset, the focus is on the capital cost of the asset and operational costs become a secondary
consideration as doe’s serviceability of the outcome.

The intention therefore is to determine the ownership of the project by identifying the owner of the
service the project will deliver. This approach places the business at the heart of project delivery.
While the business may be unable to deliver the project without assistance, it never-the-less is in the
role of primary project decision maker, albeit supported as necessary by project delivery specialists.
This ensures the project governance framework maintains a service delivery focus.

Principles 1 and 2 are focused on the project's major stakeholder – the owner of the project. Projects
have many stakeholders and an effective project governance framework must address their needs.
The next principle deals with the manner in which this should occur.

Principle 3: Ensure separation of stakeholder management and project decision making activities

The decision making effectiveness of a committee can be thought of as being inversely proportional to
its size. Not only can large committees fail to make timely decisions, those it does make are often ill
considered because of the particular group dynamics at play.

As project decision making forums grow in size, they tend to morph into stakeholder management
groups. When numbers increase, the detailed understanding of each attendee of the critical project
issues reduces. Many of those present attend not to make decisions but as a way of finding out what
is happening on the project. Not only is there insufficient time for each person to make their point,
but those with the most valid input must compete for time and influence with those with only a
peripheral involvement in the project. Further not all present will have the same level of
understanding of the issues and so time is wasted bringing everyone up to speed on the particular
issues being discussed. Hence, to all intents and purposes, large project committees are constituted
more as a stakeholder management forum than a project decision making forum. This is a major issue
when the project is depending upon the committee to make timely decisions.

There is no question that activities, project decision making and stakeholder management, are
essential to the success of the project. The issue is that they are two separate activities and need to be
treated as such. This is the third principle of effective project governance. If this separation can be
achieved, it will avoid clogging the decision making forum with numerous stakeholders by
constraining its membership to only those select stakeholders absolutely central to its success.

There is always the concern that this solution will lead to a further problem if disgruntled
stakeholders do not consider their needs are being met. Whatever stakeholder management
mechanism that is put in place must adequately address the needs of all project stakeholders. It will
need to capture their input and views and address their concerns to their satisfaction. This can be
achieved in part by chairing of any key stakeholder groups by the chair of the Project Board. This
ensures that stakeholders have the project owner (or SRO) to champion their issues and concerns
within the Project Board.

Principle 4: Ensure separation of project governance and organizational governance structures

Project governance structures are established precisely because it is recognized that organization
structures do not provide the necessary framework to deliver a project. Projects require flexibility and
speed of decision making and the hierarchical mechanisms associated with organization charts do not
enable this. Project governance structures overcome this by drawing the key decision makers out of
the organization structure and placing them in a forum thereby avoiding the serial decision making
process associated with hierarchies.

Consequently, the project governance framework established for a project should remain separate
from the organization structure. It is recognized that the organization has valid requirements in terms
of reporting and stakeholder involvement. However dedicated reporting mechanisms established by
the project can address the former and the project governance framework must itself address the
latter. What should be avoided is the situation where the decisions of the steering committee or
project board are required to be ratified by one or more persons in the organization outside of that
project decision making forum. This is the final principle of effective project governance.

Adoption of this principle will minimize multi layered decision making and the time delays and
inefficiencies associated with it. It will ensure a project decision making body empowered to make
decisions in a timely manner.