Over one‐third of projects failed to achieve their goals. Each week, executives had approximately 30 hours of project meetings to attend. Even worse, each project manager ran the meeting differently and provided different reports. Decision making was fragmented with too many people involved in multiple levels of approvals. There was no clear process for executives to know what was expected of them. It drained a great deal of time from executives for little result. In a word, the approach was chaotic. The project management office (PMO) along with the project leaders were heads‐down trying to get things done, buried in resolving the day‐to‐day issues, disconnected from business strategy. All this resulted in low sales numbers on a new product, and increasing customer complaints and product recalls in this global industrial products company. It didn't take much for us to recognize the pain in this scenario was emanating from a lack of good governance.

Imagine if you had to drive like the old days on dirt roads that are not paved, on a terrain that is cracked and made up of different silos, each with its own rules. There are some signs, but they are confusing and hard to decipher. People drive on different sides of the road as they follow their own standard without a common code of communication. There are no traffic lights or markers and no warning signs to prevent risks. Everybody is going in different directions, and without any alignment, it is cumbersome and slow. There are frequent clashes along the way, as people finger‐point and argue. You have been told to drive faster and keep track of time, and make sure you stay within the budgeted fuel limit. But you have no way of measuring or managing your performance. While you are busy trying to execute and get there, you have a limited idea as to why you are driving to begin with.

If this seems too far‐fetched, think again. This is akin to what happens in many organizations due to lack of good governance. The different vehicles are like the projects and strategic initiatives in organizations. These projects are meant to be the strategy‐execution vehicles to take the organization from the as‐is to the to‐be, future state. But without good governance, it is hard. There is no alignment between strategy and execution; there are disconnects due to lack of connection and communication; there is weak measurement and hard‐to‐monitor performance; and there is lack of preparedness for risk, change, or the ability to learn and evolve.

As the above scenario illustrates, ineffective governance risks poor quality and higher costs. According to the Project Management Institute (PMI) report, The High Cost of Low Performance (2016), “$122 million [is] wasted for every $1 billion invested due to poor project performance, a 12 percent increase over last year.” Poor governance contributes to poor performance and ineffective decision making. But the higher price is business losses, reputation damage, or weakened competitive position and failure to realize benefits to drive innovation.

TO DEFINE EFFECTIVE GOVERNANCE, UNDERSTAND ITS PURPOSE

The word governance is pervasive, but it is often misconstrued and not well understood. Governance is not management or execution. Management is the decisions you make while you are executing; governance is the structure for making them. While you are driving, you are making decisions; the lanes, the markers, and the signs provide the governance—the structure and boundaries—so you can steer in the right direction, without getting in trouble.

Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered, or controlled. Project management or PMO governance is the subset of corporate governance focused on project, program, and portfolio management.

PMI's Practice Guide, Governance of Portfolios, Programs, and Projects defines organizational governance as a structured way to provide control, direction, and coordination through people, policies, and processes to meet organizational strategic and operational goals. And organizational project management (OPM) governance is defined as “the framework, functions, and processes that guide organizational project management activities to align portfolio, program, and project management practices to meet organizational strategic and operational goals.”

A simple way to think about governance is as the structure for decision making, by defining and implementing standards, policies, procedures, rules, and guidelines.

Defining governance becomes effective and practical by understanding its purpose. Often, the purpose of governance is misconstrued as oversight, monitoring, and control, which prompts a framework of restrictive rules and policies. Instead, the question should be how to galvanize and invigorate strategy execution by designing a structure in which we can ensure alignment, make the right decisions, plan for risk, measure performance, and execute quickly and efficiently without getting in trouble. At the highest level, robust governance should make it possible to travel the highways of strategy execution in clearly marked lanes at high speeds with no fear of collision.

Discuss the purpose and focus of governance in your organization and the PMO by asking, how can we use governance to ensure:

• Alignment with business objectives and strategy
• The right priorities
• Proactive risk management
• Not getting in trouble
• Standard methods and practices are working and effective
• Benefits and business value
• Responsible use of resources
• Effective performance management
• Effective communication
• Compliance with regulations
• Ethical conduct
• Steering in the right direction
• Adapting in the face of rapid change

THE STRANDS OF GOVERNANCE

Figure 6.1 lists the DNA strands of governance. A sound governance structure rests on the clear definition and understanding of these mutually supporting strands. Woven together, these strands lead to effective governance. You will notice that words like oversight, monitoring, and control are missing from the governance strands, as they prompt a negative and constricting view of governance. If you apply and practice these mutually supporting strands, they will result in effective oversight and control without being called out. These governance strands are generic and can be applied at the organizational project management, project, program, portfolio, or PMO level.

PMO ROLE IN GOVERNANCE

The PMO can take a facilitative role to define, organize, and support the various aspects of governance described above. It can take a leadership role to connect and integrate governance across organizational silos, projects, programs, and PMOs. Some of the activities may include:

• Supporting and facilitating governing bodies
• Coordination and integration of governance processes
• Developing and maintaining PM standards
• Facilitating and supporting gate reviews
• Reviewing project/program performance and providing guidance
• Conducting project/program reviews
• Supporting preparation for project/program audits
• Assessing and escalating risks and issues
• Reviewing legal, regulatory, financial, industry, environmental, and other compliance
• Reviewing an improving effectiveness of governance processes

ADAPTIVE GOVERNANCE

Putting a governor on your engine that stops the car from going over fifty-five; you're far less likely to get into a lethal crash, but you won't be setting any land speed records either.

Eric Barker, Barking Up the Wrong Tree

Governance and agility together can seem like an oxymoron that does not belong together. But applied in the right balance, governance can galvanize strategy execution. It makes it possible to travel the highways of strategy execution in clearly marked lanes at high speeds while minimizing risk and enhancing performance. The challenge is to know how much governance is apt before it becomes like too many speed‐breakers that not only slow you down but also ruin your vehicle. Chapter 2 discussed how to find the sweet spot of rigor without rigidity, appropriate for your business and organization. To design adaptive governance for agility, here we will focus on four practices: establishing simple rules, self‐regulating behavior, identifying bottlenecks, and steering and making adjustments.

Rules are necessary to bring order in a chaotic environment. As described above they are one of the strands of governance. But most often they are misconstrued and misapplied based on traditional thinking. In the mechanical mindset, the belief is that the messier and more complex the situation, the more rules and heavy governance are necessary. This approach is understandable but flawed. It is the opposite, in DANCE project and program environments, too many rules can be paralyzing and confusing and lead to unpredictable and unintended consequences with increasing complexity. The DANCE is characteristic of too many moving parts, which interact with one another in many ways, which makes it hard to envision all possible outcomes. The key is in identifying the few simple rules that can have the most impact.

Research based on complexity science suggests that complex adaptive systems all thrive based on underlying simple rules. For example, birds in the sky can deal with immense complexity and fly in formation, without colliding with each other, based on three simple rules: separation—avoid crowding neighbors; alignment: steer toward average heading of neighbors; cohesion—steer toward average position of neighbors. Similarly, ant colonies can synchronize their work and create multilayered structures without any project managers or long meetings, based on simple rules, which can be summarized as always lay a trail of pheromone and always follow the trail. Think about what simple rules could provide focus and clarity in the midst of DANCE and complexity in your environment.

Review governance processes and explore ways to make them self‐regulated and nonthreatening. Just as speed indicator displays (discussed in Chapter 2) are designed to regulate traffic to a preset limit, governance processes can be used to define the boundaries with preset triggers for escalation. For example, rather than setting a project review or escalation meeting, the PMO can design and implement preset triggers that provide timely feedback to self‐regulate behavior in desired ways.

Governance bottlenecks can hamper the flow of execution when there are too many layers of management decision making. One way to identify these bottlenecks is to classify and separate the different types of decisions. A good analogy is to think of a tree; the roots are the critical decisions that are best handled by key executives, on the other end are the leaves, which are the day‐to‐day decisions on projects in the field that should be delegated to the PMs and project teams with clear accountability. A good rule of thumb is to have centralized decision making for the root decisions that are infrequent, not time critical, and have global impact. And decentralize decisions to the leaves, when they are frequent, time critical, and do not have global impact. The tricky ones are the connecting branches that are spread and siloed and require dialog and collaboration, which hinders agility. The PMO can be like the trunk that provides stability and connects various parts and identifies and bridges any gaps or entanglements.

Remember the scenario from the beginning of the chapter, where lack of good governance was identified as a major pain‐point. We worked with the PMO to prioritize some of the governance strands that could have a lasting impact. It was not easy with the different silos and personalities involved, but within 16 months the organization went from 60 percent project success to over 85 percent success. There was a considerable drop in customer complaints, and there were zero product recalls in that time frame. They started with changing the whole focus of the PMO based on the application of simple rules of prioritization based on customer pain‐points, connection, and simplicity. They were successful in repurposing their steering committees with clear responsibility and decision rights. They defined clear gate decision criteria similar to the one listed in Figure 6.2. They streamlined meetings and communications, with clear purpose, agenda, and expected outcomes to make meetings and decision making effective.

Previously, a product update based on a customer complaint had to go through a circuitous approval process of four or five different committees that could take upwards of three to four months. Now, particularly if it was a customer issue, it was given the highest priority. Authority and decision making were delegated to where there was first‐hand information to resolve it, cutting down the resolution time to a matter of a few days. The PMO changed from a heads‐down, inside‐out focus, to an outside‐in, customer perspective with a greater spirit of collaboration and trust, and frequent review and adaptive governance.

The traditional view of governance is based on a defined process that has the advantage of being predictable and providing control. But its weakness is that it can be inflexible and not work well in DANCE and complex environments. The need for agility requires an empirical process that is based on observation and is adaptive to uncertain and changing conditions. Any governance framework should be dynamic and adaptive to the evolving conditions and organization's needs.

Governance tends to lean on monitoring, control, and oversight. In our practice, we view it more as a steering function. Strategic‐execution through “steering” is the untold benefit of governance. The etymology of govern includes this concept from the Middle Ages: “to steer or pilot a ship.” In this sense, we can think of governance as a continuous stream of course corrections to reach our objectives. Changes and “disruptions” are to be expected just as a ship captain expects to encounter rough seas from time to time. Highly effective governance means staying on course and achieving your strategy. Poor governance means getting lost, wasting resources, and frustrating stakeholders; it doesn't have to be that way.

DEVELOPING GOVERNANCE INTELLIGENCE

Use the following checklist of questions to reflect and develop governance intelligence. Pick and prioritize what to focus on over a period of time to enhance governance intelligence:

• How can we review, assess, and improve the effectiveness of our current governance structure?
• How can we improve the effectiveness of our steering bodies? Do they have a clear charter and responsibility?
• What governance actions can ensure better alignment with business objectives and strategy?
• What governance actions can ensure we are focused on the right priorities?
• How can we enhance governance for effective performance management?
• How can we implement or improve governance to ensure benefits realization and business value?
• How can we review and assess if standard methods and practices are applied, working, and effective?
• Are current governance policies effectively communicated and understood?
• Do we have appropriate policies and procedures that drive the right behaviors?
• How can we improve the effectiveness of phase gates?
• Do we have adequate project review and audit process in place?
• How can we ensure responsible use of resources?
• How can we improve the clarity of responsibility, accountability, and authority for critical activities?
• Do we have well‐defined decision rights and decision rules to speed decision‐making?
• How can we streamline governance processes to increase decision speed?
• How can we improve governance for proactive risk management?
• How can we ensure we are not getting in trouble?
• How can we ensure compliance to regulations?
• How can we ensure ethical conduct of project staff and teams?
• What level of redundancies and overlaps exist in existing governance structures?
• How can we remove governance bottlenecks?
• How can we better apply and practice rigor without rigidity?
• Are we tapping into opportunities for self‐regulated governance where applicable?
• How are our governance processes slowing us down from conducting business?
• Is our governance structure impeding innovation?
• How can we better learn and adapt governance in the face of rapid change?

KEY TAKEAWAYS

• The purpose of governance should not primarily be oversight, monitoring, control, and limitations. Instead, it should galvanize strategy execution by ensuring alignment, proactive risk management, better performance, and decision making.
• A sound governance structure rests on the clear definition and understanding of the mutually supporting strands of governance—steering bodies, standards, policies and procedures, gates, reviews/audits, compliance, responsibility and accountability, decision rights, and rules/guidelines.
• The PMO can take a facilitative role to define, organize, and support various aspects of governance. It can take a leadership role to connect and integrate governance across organizational silos, projects, programs, and PMOs.
• Any governance framework should be dynamic and adaptive to the evolving conditions and organization's needs.
• To design adaptive governance for agility, establish simple rules, find ways to self‐regulate behavior, identify and redesign decision‐making bottlenecks, and focus on steering and making adjustments.