Chartered Secretaries Risk & Compliance Module 8 - Project Governance - May 2010

© Chartered Secretaries Australia Ltd 2010

Risk and Compliance

Module 8 – Project Governance

Dr Raymond Young – University of Canberra


Agenda

Context & Key Concepts

Best practice

Specific issues: • Cultural barriers

Application: Case study


WHY GOVERN PROJECTS?Context


The role of projects

Business As Usual

Services& Value


BAU performance over time

Impacted by demographic, financial and global forces

Business As UsualServices& Value

Demographicfinancial& globalforces

The role of projects


Projects needed to deliver

significant change

Business As Usual70-80 %

BETTER

Projects20-30 %

The role of projectsproject based organisational change


Oversight blind (29%) or nil (16%)

Increasing degrees of negligence

Level of scrutiny (benign economy)

__% projects perceived to fail

New levels of scrutiny

• Management of large-scale expenditures is a fiduciary duty requiring careful oversight.

The results were “tantamount to negligence”.

Deloitte( 2007) What the Board Needs to Know About IT: Phase II Findings

• “A pay structure that rewards origination without regard to investment outcomes is not appropriate”

Michael Larkin, CEO Babcock and Brown (AFR 11 Nov 2008, p 84)

The case for governing projectsThe Risk and Compliance perspective


¾ of mergers and acquisitions never pay off

2/3 of IT projects deliver no benefits whatsoever

most large capital projects fail to live up to expectations

majority of efforts to enter new markets are abandoned in a few years

70% of new manufacturing plants are closed in their first decade

Level of scrutiny (benign economy)

__% projects perceived to fail

New levels of scrutiny

• Management of large-scale expenditures is a fiduciary duty requiring careful oversight.

The results were “tantamount to negligence”.

Deloitte( 2007) What the Board Needs to Know About IT: Phase II Findings

• “A pay structure that rewards origination without regard to investment outcomes is not appropriate”

Michael Larkin, CEO Babcock and Brown (AFR 11 Nov 2008, p 84)

The case for governing projectsThe Risk and Compliance perspective


Governance

Mic

rosc

ope

ProjectsProjects

On-timeOn-budget

Inside the head of project managers

Young and Jordan 2008

Kwak and Anabari 2009VIC 100b

Young and Jordan 2002StrategyTelescope


Inside the head of boards and top managers

Projects

e-commerceRisk

13 Dir: 60+ boards

Strategy should be developed by management

E-commerce is important but strategy is hard …

3 approaches – (2) get an expertFew have IT background Widespread delegation to mngt / consultants




Telescope

Mic

rosc

ope

ProjectsProjects

Strategy

On-timeOn-budget


Young and Jordan 2008Fail15%

(Standish 1999,2003)

No30-40%

(Wilcocks and Margetts

1994)

Some35%

OK10-20%

(Clegg et al 1997)

1/3 of projects are successful

and deliver 30% return on

investment

2/3 of projects deliver no benefits

whatsoever

[2] I would have thought it would be the opposite … are

there stats by industry?

[3] valuations are heavily discounted whenever a big IT

project is announced

[4] they hardly ever define adequately

what success looks like

[1] That’s probably about right…



Projects

On-timeOn-budget



[3] Sponsors definitely drive success … we would need to see a track record

of this working

[4] You’ve definitely got this right by putting the strategy

first

[1] Yes … I think you could sell that. A directors job is to ask questions.

VIC 100b


Financial/Strategic ImplicationsO

KS

ome

No

Fai

l

ROI30%

CurrentPerformance(68% under)

OK

Som

eF

ail

ROI130%

BetterPerformance(43% under)

OK

Can

cel

ROI220%

ExcellentPerformance

(15% cancelled)

Source: R. Young, “What is the ROI for IT Project Governance? Establishing a benchmark.,” in 2006 IT Governance International Conference (Auckland, New Zealand, 2006)


KEY CONCEPTSPolicy/Strategy implemented through Portfolio/Programmes/Projects


Project Governance: Connecting Corporate Governance and Project Management

Standards:OECD GuidelinesASX GuidelinesAS8000

Focus on Vision and Mission (Corporate Plan - normally 3+ years)

Corporate Governance:The system by which organisations are directed and controlled

Standards:PRINCE2 , MSPPMBOK, OPM3

Focus on Outputs e.g. time, budget, quality,

stakeholder support, outcomes

Project Management:The way of guiding and managing projects to ensure successful completion from start to end

Standards:Gateway HB280AS8016www.valuedeliverymanagement.com

Focus on Outcomes Annual Plan

Project Governance:The connection between corporate governance &project management


OutputInitiatives

Project – AS8016 definitionan enterprise carefully planned to achieve a particular aim - Oxford Dictionary

10-year strategic goals

↑ economy, ↑ jobs (↑quality)

↓ crime 5% & ‘feel safer’

↑ health• ↓ waiting times (emergency,

elective, …)

↑ education • ↑ literacy/numeracy• >90% yr 12• ↑ VET participation

↑ transport• ↓ commuting times

↑ environment• ↓ water usage 15%

Asset Investments

Programs asset investments alone generally will not

lead directly to the realisation of strategic goals


A ValIT understanding of Governance

Kubernán (gr): to steer a ship – the process of continually orienting and adjusting

“Managing an uncertain journey to an uncertain destination”

Source: VALIT & John Thorp


From project management to governance of strategic programmes

StrategyDefined

outcomesDelivered outcomes

Benefits

Project

Vision: to improve the social and economic wellbeing through a responsive and sustainable education and training system

State Strategies (S4/S5): increased levels of attainment for all students•Student skills•Teacher quality

Desired Outcomes: •Increase literacy and numeracy

•More completing year 12•Increase participation in VET

Governance

Programme of change


Governanceof Programmes

Programme management

Governanceof Programmes

Programme management

Assessment of tools and frameworksWhere to focus effort to engage top management

Efficiency

EffectivenessAny

benefitsBenefits aligned

to strategyRealisation

of strategic goals

Portfoliomanagement

Pro

ject

M

an

ag

em

entOn-time

On-budget

Avoidduplication

Products/Outputs

Programme PortfolioManagement

Victorianinvestmentframeworks


BEST PRACTICE Enterprise-based Project Governance

© Chartered Secretaries Australia Ltd 2010Business processes

ICT Operations

GovernanceSupport

Changed Business Processes

Changed ICT Operations

Evaluate

InitiateDirect & Monitor

Investment:benefits or terminate?

Strategy/capability: how much change is required?

Investment & Strategy:Benefits / alignment?

Responsibility: Project Sponsor?

Performance & Behaviour:measures and motivation?

67%->40%Business Case

40% ?MSP?

5-23%

33-67%ChangeTracking™

0-13%Benefits Realisation

ITIL, COBITProjects

PMBOK, PRINCE2, etc

Conformance & Behaviour: culture for issues to be raised?

??%

HB280, AS8016, 6Q Governance™


Other Best Practice Guidelines

SARBOX, APM, ANAO (8-3)• Oversight (Q1 –Q4) & Review (Q5-Q6)• Stakeholder engagement (Q1, Q2, Q5)

Failure factors• Unclear goals / requirements (Q1)• Inadequate information (Q1, Q5)• Inadequate resources (Q2)• Poor communication / management (Q5)• External events (Q5)• Unproven technology


SPECIFIC ISSUESTechnical skills and cultural barriers


Public-Private Partnerships• Procurement • Contracts• Outsourcing


Source: VALIT & John Thorp

Can’t kill projects

Leads to..Leads to..

Too many projects

Quality of execution suffers

Underestimation of risks and costs

Projects not aligned to strategy

Over budget

Projects Late

Business needs not met

Lack of confidence (in IT)

Results in..Results in..

Benefits not received

SituationSituation

Reluctance to say no Reluctance to say no to projectsto projects

Lack of Strategic FocusLack of Strategic Focus

Projects are “sold” on Projects are “sold” on emotional basis -- not emotional basis -- not

selectedselected

No strong review processNo strong review process

Overemphasis on Overemphasis on Financial ROIFinancial ROI

No clear No clear strategic criteria strategic criteria

for selectionfor selection

Without Effective Governance…


Cultural barriers:

• Boards and top managers may have to accept that they personally have the most influence whether a project succeeds or fails

• Boards, top managers and their advisors may have to accept that the current ‘expert advice’ has less impact on success than previously believed.


CASE STUDYAddress one or more case studies as time allows


Situation problem 1 (8-19)

The Department of Foreign Affairs and Trade (DFAT) has embarked on a major IT and associated core systems redesign project to better coordinate and streamline intelligence data from various Commonwealth agencies, most of which are under the Attorney-General’s portfolio (Federal Police, ASIO, ASIS, Office of National Assessments) and foreign embassies, many of which are considered sources of intelligence used by, or of interest to, the above security agencies.

The project will be undertaken over eight months concurrently with a major review of the overall powers and responsibilities of the various national security agencies sponsored by the Prime Minister and his National Security Advisor.

The project is due to report on a three-monthly basis to the National Security Committee (NSC) and has a weekly review by a DFAT steering committee, with one ex-officio representative from the Attorney-General’s Department nominally representing all the National Security Agencies.


Situation problem 1 (8-19)

You have been asked to write a report detailing the main governance issues and risks to this project’s success and provide strategies or changes to the current project design to address these problems.


Q1 Semester 2, 2009

The Department of Social Security (DSS) has decided to outsource its hardware acquisition and maintenance to a commercial service provider. The DSS is establishing a project to select an appropriate outsource partner and to transition the relevant applications to the successful party.

DSS has clients who number in the millions and who rely on the benefits they receive as an essential part of their livelihood. DSS systems must be able to deliver the payment of benefits on time and without fail. Failure to do so can result not only in hardship for the clients but in political embarrassment for the government. The transition to new maintenance and development arrangements has the potential to cause disruption to service delivery and to inconvenience the front line staff responsible for client liaison.

DSS systems link to other government agencies. The most important are the ATO and the Department of Health and Ageing.

DSS expects to achieve both operational efficiencies and financial benefits from the outsourcing, including a lower cost of delivery of the relevant IT services.


Q1 Semester 2, 2009

Provide the major factors which the DSS will have to take into account in establishing the project.

Recommend the steps that will need to be taken to ensure:• successful selection of the outsource partner,

• transition to the new arrangements

• and effective management of the outsource arrangement after the implementation.


Questions & Discussion

Chartered Secretaries Risk & Compliance Module 8 - Project Governance - May 2010

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Transcript of Chartered Secretaries Risk & Compliance Module 8 - Project Governance - May 2010