CS1.2.2 Project Management & Corporate Governance Yvonne Butler
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]
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