CS1.2.2
Project Management &
Corporate Governance
Yvonne Butler
MONDAY 8 OCTOBER, 2007
Project Management - Setting the Standard
Australian Institute of Project Management National Conference 2007
Hobart Tasmania
October 7 – 10, 2007
Corporate Governance and
Project Management
Governance
Yvonne Butler
General Manager
Strategy & Development
APP Corporation
Overview
Corporate
Strategy
Corporate
Governance
Governance of
Project Management
Corporate Strategy
Some statistics…

Fortune Magazine -less than 10% of
business strategies are effectively delivered

AICD - 7/10 CEO’s who fail do so not
because of wrong strategy but because of
poor execution

70% of capital expenditure spent on
initiatives not aligned with organisational
strategy

Caritas – 79% of Execs state that they have
at least 10% redundant projects

PwC – 2.5% of companies had 100% of
projects on time, within budget, to scope
and delivering the right benefits
So why do strategies fail?
Wrong strategy….
Right Strategy, Poor Execution

Implemented the wrong initiatives (or in
wrong order)

Didn’t know about similar initiatives already
underway

Unrealistic time commitments

Idealistic cost expectations

No prioritisation


No or ineffective portfolio/program/project
management
Poor governance
Corporate Governance
Definitions
‘Corporate governance involves a set of relationships
between a company’s management, its board, its
shareholders and other stakeholders. Corporate
governance also provides the structure through which
the objectives of the company are set, and the means
of attaining those objectives and monitoring
performance are determined.’
OECD Principles of Corporate Governance
2004
Definitions (cont’d)
‘Corporate governance is concerned with structures
and processes for decision-making, accountability,
control and behaviour at the top of organisations’.
Standards Australia
Applications of Corporate Governance
HB 401-2004
Definitions (cont’d)
‘Corporate governance is the framework of rules,
relationships, systems and processes within and which
authority is exercised and controlled in corporations…
It influences how the objectives of the company are
set and achieved, how risk is monitored and assessed,
and how performance is optimised.’
Australian Stock Exchange
Corporate Governance Principles 2007
ASX 8 Principles:
1.
Lay solid foundations for
management and oversight
2.
Structure the Board to add
value
3.
Promote ethical and
responsible decision making
4. Safeguard integrity in
financial reporting
ASX 8 Principles (cont’d):
5. Make timely and balanced
disclosure
•
Respect the rights of
shareholders
• Recognise and manage
risk
•
Remunerate fairly and
responsibly
Principle 7: Recognise and
Manage Risk
 Risk management is the culture, processes and
structures of an organisation
 Companies should have policies for oversight and
management of business risks (not only financial)
 Requires management to implement risk
management and internal control systems
 CEO required to disclose material risks and
provide improvement assurance
The context of Risk
How Governance and Adding Value come
together
Audit &
Review
C’tees
Corporate Approach to Risk
Management
Context
Identify
Analyse
Evaluate
Treat
Communicate
Why is Corporate Governance
Important?
 Key to determining the cost of capital in a global
capital market
 Investors are willing to pay more for the shares
of a well-governed organisation
 “Organisations that have good governance are
able to realise a premium of more than 20% from
their investors”
McKinsey’s Investor Opinion Survey, 2005
So where is this going?
SO WHAT??
Corporate Governance
Strategic Planning
Governance
of
Project Management
Management
of
Operations
Portfolio
Program
Project
Governance of Project
Management
What is it
 Is the link between corporate governance and
project governance
Concerns those areas of corporate governance
specifically related to portfolio, program and project
management activities in organisation
Explicit alignment of the organisation’s project
portfolio with the organisation’s objectives
 Often risk based
 Influences directors and executives to adopt
excellent practices regarding the governance of 3Ps
Achieving your vision
Business Transformation
Portfolio Management
Office
Program Management
Office
Program and Project Management
Strategic Portfolio Definition
Organisational
Direction
Define
Portfolio
Project Management
Office
Plan Program
of Work
Deliver Program
of Work
Realise Business
Benefits
Deliver Projects
Information and Knowledge
Benefits
 Assures directors that robust governance is
consistently applied across projects managed
throughout the organisation
 Optimises the portfolio of projects
 Assesses 3P progress, identifies problems
 Focuses support, flexes resources, better
communication
 Minimises risk
 Maximises benefits to be realised from projects
 Ensures the continued performance of the organisation
Key Principles
 Board has overall responsibility for the
governance of project management
 Organisation fosters a project management
culture of improvement and trust
 Roles, responsibilities and performance
management criteria for governance of project is
clearly defined
Directing Change:
A Guide to Governance of Project Management
Association for Project Management (UK)
Principles (cont’d)
 Disciplined governance arrangement, supported by
appropriate methods and controls, are applied
 Coherent relationship is demonstrated between
business strategy and project portfolio
 All projects have approved plans with authorisation
points at which business case is reviewed
 Board decides when independent scrutiny of projects
and project management systems is required
 Clearly defined criteria for reporting project status
and escalation of risks
Good start, but…
No reference to:
 prioritisation
 benefits realisation
 portfolio or programs - jumps
down to project level
 no explicit linkage with portfolio
management and the critical
role it plays in delivering
organisation strategy
The Real Issues?
 Governance of Project Management, Portfolio
Management hasn’t become real yet.
 Surprising given more companies are using
project management disciplines to implement
corporate strategy and manage multiple projects.
 Project governance, should be aligned to
governance of project management, which should be
aligned to corporate governance
The Real Issues?
 Need to see explicit connection between portfolio
management and delivery of organisational strategy
 Most Board’s see project management as tactical.
We need to fill that gap to ensure corporate
sustainability.
 Portfolio, program and project management
should be common terms in the Boardroom and at
executive management
Call to Action…
Peak bodies need to
start talking and elevate
PM from tactical to
strategic
ASX
Corporate
Governance
AICD/ AIM
AIPM
Governance of
Project Management
Project Governance
Governance Task Force
The road becomes clear
for business success…
[email protected]