Post Merger Integration - Transformation Governance Principles

Transformation Governance ( Prince2, MSP, P3M3 or P3O) is commonly regarded as having five elements, based on taking the various principles and converting them into ‘method’ or framework

Alignment to organizational objectives

Effective project management relies as much on an organization doing the right projects as it does on doing those projects right. The wrong set of projects excellently delivered may be of little value to the organization.

Although the question of the ‘best set of projects’ is the realm of portfolio management, what is important is that each and every project is able to demonstrate (typically through its Business Case) its contribution to the organization’s objectives. Obviously the better defined those organizational objectives are the easier it will be for projects to demonstrate their alignment.

Without an understanding of the organization’s objectives, it is not possible to govern how ‘an organization or partnership fulfils its overall purpose, achieves its intended outcomes for service users, and operates in an effective, efficient and ethical manner’.

Alignment to the organization’s objectives provides the context for the project’s purpose. It enables effective decision making as those involved in the project are able to relate decisions to the effect on the project’s contribution to those objectives. It keeps projects outcome-focused rather than activity-focused.

Being able to demonstrate alignment to organizational objectives becomes really important in times of austerity as it enables effective decision making on which projects to cancel, suspend, continue or accelerate.

Golden thread of delegated authority

There needs to be a direct chain of accountability from the most senior responsible person all the way down to the individuals responsible for undertaking work on behalf of the organization. This chain is often referred to as the golden thread. The golden thread not only needs to be based on an unbroken chain from top to bottom, but it should also be clear to everyone in that chain what their authority is and which powers are reserved for higher levels of authority.

The purpose is to ensure effective decision making by defining at what level of the organization the various decisions should be made. The golden thread of delegated authority helps decisions to be made at the right level within the organization.

Level

Responsibility

Example of delegating authority using tolerances

Corporate or

programme

management level

Those responsible for commissioning the project.

Corporate or programme management sits outside the project but sets the targets (and tolerance levels) for the project. The three levels of management within the project “direct”, “manage” and “deliver” within these tolerances and escalate any forecast breaches of project tolerance.

Directing level

Those responsible for setting direction.

The Project Board has overall control at a project level, as long as forecasts remain within project tolerance, and will allocate tolerances for each management stage to the Project Manager. The Project Board has the ability to review progress and decide whether to continue, change or stop the project. During execution of the Project Plan, if any forecasts indicate that the project is likely to exceed the agreed project tolerances, then the deviation should be referred to corporate or programme management by the Project Board in order to get a decision on corrective action.

Managing level

Those responsible for the day-to-day management of the project.

The Project Manager has day-to-day control for a management stage within the tolerance limits laid down by the Project Board. During execution of a Stage Plan, if any forecasts indicate that the stage is likely to exceed the agreed stage tolerances, then the deviation should be referred to the Project Board by the Project Manager in order to get a decision on corrective action.

Delivering level

Those responsible for producing the project’s deliverables (products).

The Team Manager has control for a Work Package, but only within the Work Package tolerances agreed with the Project Manager. During execution of the Work Package, if any forecasts indicate that it is likely that the agreed tolerances will be exceeded, then the deviation should be referred to the Project Manager by the Team Manager in order to get a decision on corrective action.

 

Without a clear understanding of where the types of decisions can be made, decision making can be ineffective because:

  • Decisions made at one level (e.g. project level) may then be remade or unmade at other levels (e.g. programme level) and people can lose confidence in the robustness of decisions
  • Organizations that do not delegate enough reduce their capacity for change, whereas organizations that delegate too much lose control over what work is being undertaken. Without an unbroken chain of accountabilities, decision making can be ineffective because:
  • It prevents the flow-down of alignment to organizational objectives with decisions being made in isolation from the objectives of the level above
  • There will be people in the organization who are not held to account for their decisions and actions by those in the level above them.

Reporting

An essential element of good governance is that those who are delegated authority should:

  • Periodically report progress against the responsibilities delegated to them (their accountabilities)
  • Report if they are unable to meet their accountabilities within the authority they have been granted
  • Report if there are any conflicts of interest that may affect decisions and actions they undertake using the authority they have been granted.

The frequency, content and format of reporting should be agreed at the time when authority is granted.

It is not possible to continually supervise the person to whom you delegate responsibilities. The whole point of delegation is to let them get on with activities on your behalf. However, having delegated a responsibility and associated authority it is important to remain informed of how those responsibilities are being fulfilled, if they remain within the authority granted and if there are any conflicts of interest that may influence decision making.

PRINCE2 addresses the reporting element through the progress theme, which in turn is driven by the management by exception principle.

The purpose of the progress theme is to establish mechanisms to monitor and compare actual achievements against those planned; provide a forecast for the project objectives and the project’s continued viability; and control any unacceptable deviations.

Reporting is required at all the management levels: each level that delegate’s authority needs to agree with the level below which reports it expects to receive and when. The progress theme includes two types of reporting: time-based and event-based.

  • Time-based reporting involves reporting progress against the agreed plan at periodic intervals, such as weekly and daily. This typically involves producing and issuing Checkpoint Reports and Highlight Reports.
  • Event-based reporting involves reporting specific information based on certain events, such as when completing a stage, raising a new risk, a request for change or exceptions. This typically involves producing and issuing End Stage Reports, Issue Reports and Exception Reports.

An exception is a situation where it can be forecast that there will be a deviation beyond agreed tolerance levels. Tolerances are the permissible deviation above and below a plan’s target objectives (typically time and cost, but may also include quality, scope, benefit and risk) without escalating the deviation to the next level of management.

The management by exception principle encompasses:

  • Delegating authority from one management level to the next by setting tolerances against the target objectives for the respective level of the plan
  • Setting up controls so that if those tolerances are forecast to be exceeded, they are immediately referred up to the next management layer for a decision on how to proceed
  • Putting an assurance mechanism in place so that each management layer can be confident that such controls are effective.

The controls that define reporting requirements are captured in the Project Initiation Documentation generally and then in each level of plan (project, stage, team) specifically. The Work Package will also define any reporting requirements specific to that work.

Independent assurance

Assurance is the activity of reviewing whether objectives will be met. It is an independent check that the structure and systems put in place are adequate to fulfil the responsibilities that have been delegated and that decisions and actions taken have been in accordance with the authority granted.

Assurance provides a counterbalance to the self-reporting from those who have been delegated authority. It is the responsibility of the person granting authority to define what assurance activities will be undertaken.

Assurance enables transparency of decision making and provides confidence to those granting authority that objectives can be met without them needing to get more involved. Without ongoing assurance, those granting authority are solely relying on the self-reporting of those they have delegated authority to. Self-reporting is important but, as the sole means of control, it opens up the possibility of abuse.

Decision gates

Decision gates provide formal points of control at particular points in a lifecycle. The concept is that authority is only granted up until the next decision gate, and that to carry on a formal decision needs to be made to renew the authority (or to grant new authority). They are often referred to as stop/go reviews as the default position is that there is no authority to proceed without renewed delegation.

Decision gates can be applied at all levels in an organization, for example:

  • Corporate level – annual/quarterly budgeting approvals and key investment decisions
  • Programme level – project approvals
  • Project level – stage approvals
  • Team level – work package and product approvals.

Decision gates provide a final ‘fail safe’ if the reporting element masks the true position and any issues or weaknesses are missed by the assurance activities.

Decision gates provide a periodic opportunity to check if the other governance elements are adequate or whether they need to be amended.

Conclusion

 

Senior management commitment to good governance is critical for both the governance of a project and the governance of project management. Nearly every study into project management performance shows that appropriate senior management involvement directly correlates with successful projects.

Good governance should not been seen as an additional bureaucratic burden for an organization but as an aid to reducing costs and gaining more value by avoiding poor project selection and poor project execution.

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