Governance: Driving the Project Agents and Protecting the Project Business Case

=> The project as a Temporary organization

?Adopting Agency Theory as lens a project is viewed as a temporary agency working on behalf of a principal party to deliver the benefits for stakeholders and value to sponsors:

- The project manager and its team integrate the project management agent party, responsible for delivering the outputs (the products of the project) to the project owner party.

- The owner and its permanent infrastructure integrate the project owner agent party, responsible for receiving the outputs and, by using the outputs, for realizing the outcomes that, by effect, will generate the benefits for the sponsor party.

- The parent organization and its permanent infrastructure integrate the sponsor principal party, responsible for sponsoring the project, for legitimating and empowering both agents’ structures, and for putting in place a governance framework to constrain and drive the acts of both agents, monitoring and controlling them to assure the parent organization best interests, i.e., protecting the business case that has justified the project to exist.

This conceptualization is in line with other studies which have identified the 3 (three) primary roles and the 2 (two) major project entities involved in the project management and implementation (Turner and Müller, 2003; Zwikael and Smyrk, 2012; Badewi, 2016; ul Musawir et al., 2017; Zwikael, 2018; Zwikael, 2019; ul Musawir et al., 2020), as per illustrated in Figure 1.

“Stationary and temporary organizations fulfil different roles and often coexist. When a task is associated with a great deal of uncertainty and complexity, projects are more likely to be run by ‘pure’ temporary organizations. If a large part of the work undertaken in a project is similar to that of other projects, sharing of resources and knowledge through a stationary organization becomes attractive” (Modig, 2007). Modig (2007) suggests that: “to enable efficient project and program management, these differences in organization structure have to be considered”.

When the project is bigger in size it is common to see the project temporary organization structured outside its sponsor organization, as per illustrated in Figure 2. In this case the governance is still implemented, but in alternative ways to constrain and drive the acts of both agents, monitoring and controlling them to assure the parent organization best interests, i.e., protecting the business case that has justified the project to exist.

?=> The Governance Framework

The governance framework of the parent firm is an effector to the performance of the project temporary organization in the pursuit of project success. The firm’s governance is the “bridging mechanism between corporate governance and project management” (Alvarez-Dionisi, 2012). A typical governance framework includes:

-??????? “Effective Project Governance”, and

-??????? “Benefit Management Practices”.

Both parts of the governance are in place for the sake of the interests of the sponsor, the principal party. Both parts include the definition of project systems, processes, routines, and organizational structures, able to direct and influence the governing of multiple projects within the parent firm; and is key in the management and controlling of the alignment between the project temporary organization (the agency managing and implementing the project) and the permanent structure (the owner structure and the sponsor, the principal party) in the pursuit of the strategic objectives of the project.

?Governance framework acts over both agent structures, project management and project ownership, to assure a smooth and effective flow of value, as per illustrated in Figure 3.

. Effective Project Governance (EPG): the governance of the project management structure ?

The “Effective Project Governance” influences both the performance of the project temporary organization and the project success. EPG acts mainly on the project management temporary structure and is associated to the relationship between the project temporary organizations and its parent firm, the permanent sponsor organization. EPG is the bridging mechanism between corporate governance and project management (Alvarez-Dionisi, 2012). EPG aims to steer the project management function (Too and Weaver, 2014), and to align the objectives of a project with the objectives of the parent sponsor firm (Levie et al., 2017). EPG defines and allocates accountabilities to ensure projects realize their business case (Zwikael and Smyrk, 2012). EPG influences the temporary organization performance and, as a consequence, the project success.

EPG can be assessed by 9 items (Musawir et al., 2017):

EPG1 - The management board of the sponsoring firm had overall responsibility for the Governance of projects.

EPG2 - Disciplined governance arrangements were applied throughout the project life cycle.

EPG3 - Roles and responsibilities for the governance of projects were defined clearly.

EPG4 - The project's business case was supported by relevant and realistic information that provided a reliable basis for making authorization decisions.

EPG5 - A clearly defined criteria was used for reporting project status and for the escalation of risks and issues to the relevant organizational levels.

EPG6 - Decisions made at authorization points (or gates) were recorded and communicated to the relevant stakeholders.

EPG7 - The project had a project owner who was the single point of accountability in and to the organization for realizing project outcomes and benefits.

EPG8 - The project had a project manager who was accountable to the project owner for achieving project objectives and deliverables.

EPG9 - The parent firm sponsoring the project fostered a culture of frank internal disclosure of project management information.

. Benefit Management (BM) practices: the governance of the business case

Benefits constitute the reasons and are the ultimate deliverables (Bradley, 2010) for the sponsor organization, encompassing both the project management and the project owner agents. The practices put in place by the sponsor to managing the realization of the benefits are usually denominated benefit management practices (BM). BM is a governance vital component for the sponsor to support both project success and business success, once project success is a vital component of business success (Serra and Knuc, 2015). BM incorporates practices and processes designed to monitor and control project benefits (Breese, 2012) and, when combined with EPG, it enhances the probability of project success (Badewi, 2015). BM are put in place to monitor and control the ownership party performance in realizing the outcomes, going further than monitoring just the project management success. The over focus on the project iron triangle performance (cost, time, and scope) results in what is known as an “output-focused” mentality (Chih and Zwikael, 2015; Badewi, 2015), and is associated with problems at the organizational and the individual levels. Another critical issue in focusing only on the project output dimensions (cost, time, and scope) is associated with the allocation of authority and responsibility between project managers and functional managers in the typical matrix structure organisation (Maylor et al, 2006). Focusing only on project output dimensions could confuse the orientation of a project manager and, consequently, could result in project customers and sponsors unsatisfied (Shenhar and Dvir, 2007). BM put in place to handle this issue. It is associated to the realization of the end-benefits of projects (Bennington and Baccarini, 2004; Breese, 2012; Chih and Zwikael, 2015; ul Musawir et al., 2017). BM results in processes and routines to assure benefit realization management and monitoring towards a smooth and effective flow of value.

BM can be assessed by 12 items (Serra and Knuc, 2015; ul Musawir et. al, 2017):

BM1 - Expected outcomes (the changes and / or upgrades provided by project outputs) were clearly defined.

BM2 - The value created to the sponsor firm by the project outcomes (the changes and / or upgrades provided by the project outputs) was clearly measurable.

BM3 - The strategic objectives that project outcomes (the changes and / or upgrades provided by the project outputs) were expected to support the achievement of were clearly defined.

BM4 - A business case was approved at the beginning of the project, describing all outputs, outcomes and benefits that were expected from the project.

BM5 - Project outputs (project products) and outcomes (changes provided by project outputs) were frequently reviewed to ensure their alignment with expectations.

BM6 - Stakeholders were aware of the results of project reviews and their needs were frequently assessed with a view to make changes.

BM7 - Actual project outcomes adhered to the expected outcomes planned in the business case.

BM8 - Activities aiming to ensure the integration of project outputs to the regular business routine (training, support, monitoring, and outcomes evaluation) were executed as part of the project's scope.

BM9 - After project closure, the sponsor firm kept monitoring project outcomes in order to ensure the achievement of all benefits expected in the business case.

BM10 - From the first delivery to the project's closure, the sponsor firm performed a pre- planned, and regular process to ensure the integration of project outputs into the regular business routine (including outcomes evaluation).

BM11 - A project benefits management strategy is applied throughout the firm that sponsored the project.

BM12 - A project benefits management strategy was applied for the project under analysis.

=> Application on Research Studies

This conceptualization of governance was explored in a research study available at:

https://dx.doi.org/10.13140/RG.2.2.33735.78244