2
How to Govern Projects: Six Questions

Q1. What is the Desired Outcome?

Effective governance of projects requires clarity on the desired outcome and the first 6Q GovernanceT question, Q1, is to clarify the link between business outcomes, benefits, and strategy. Research suggests that projects are funded without a business case 33% of the time [1]. In addition to this, 27% of the time project sponsors admit that they exaggerate the benefits in order to get funding [2]. The implication is that at best, only 40% of projects have any clarity on the desired business outcome. The problem is that the business case is commonly treated as a hurdle to be jumped rather than as the first opportunity to seriously evaluate where effort should be directed. It is up to the board and the top management team to call out such behaviour and impose more rigorous discipline on investment decisions. Consider the following war story:

War Story - Lying to the Board

The board of a top-listed company was considering a proposal for an increase in the budget of an IT project that was fundamental to its international operations.

The project commenced some two years beforehand. The task of developing a concept statement for the project was a part-time job for an executive with some business and IT experience. The project estimate was around $35M, with an NPV of net benefits of $50M.

The next stage was the development of a feasibility study and business case. This stage was managed by a general manager with business and IT experience. This was his last assignment before retiring. At the end of this stage, the project team had grown to 30. The project cost estimate was $75M, and the NPV of net benefits had grown to $100M. It was close to a year since the concept paper was submitted - a lot of time had been wasted, and the benefit estimates turned out to be 'reverse-engineered' to meet required benefit targets.

The company's board approved continuing to a build stage, with an initial pilot site. The project was managed by someone with little direct project management experience. By the end of the pilot stage, the project estimate had increased to over $120M and the NPV of net benefits had increased to $200M on increasingly doubtful estimates. Another year had passed to get to this point. Over $50M had been spent . though, surprisingly, no one could be sure how much had been spent . the company did not have a project accounting system or a cost/schedule control system.

The project's benefits were in areas of new and increased revenue from overseas operations and reduced costs. It was fairly evident that the benefit estimates were way overstated and there was sufficient reason to believe that costs were understated. A 5-page paper was developed to brief the board and seek approval for a further increase in budget. The 5-page paper drew attention to the existence of a more detailed document that was available on request from the company secretary's office.

The 5-page paper was presented to a silent board by an executive director. The request was approved. One of the board members commented later that everyone knew that they were being lied to, but no one was prepared to ask the questions that would bring this issue out.

We have to sympathise with the board in the above war story. Asking Q1 is to open a can of worms. In the ideal world, the strategy gets determined at the beginning of the year and then it becomes the job of management to execute the strategy. Asking Q1 is to question the strategy and to ask Q1 once a project has started risks having to redo the strategy . re-examining the PESTEL analysis, VRIN, 5-forces analysis and recalling the expensive consultants in their nice suits . it could add months to the project.

The trouble is that at the beginning of any project, there are many unknowns. It is only as the project develops that the real issues become clear. The customers are unable to explain what they want in the beginning when the project is just an idea and other important stakeholders only realise the implications of various decisions as to the project proceeds. Think of Samsung's recent experience with its Galaxy Note 7 exploding in its customer's hands because its battery overheated.

There is almost always a need for planning and then some retrospective sense-making. We like to present our endeavours as meticulously planned, but the reality is often such that we adopt our plans to what is at hand. Therefore, there will have to be a continuous effort of comparing the original brief to the business strategy (that may have changed) and the project outputs that are being generated. It will be a dance between the emerging and the planned that will determine the best balance for what the project is about. Note however that the more complex the project gets, the less the planning will work, and the more change will have to be accommodated during the execution. This means that the project sponsor should favour serendipity and emergence a lot more in more complex and large-scale (both budget wise and time wise) projects and can stick to the original brief more firmly in fast-paced and more straightforward projects. This warrants very different leadership styles, the former being facilitative and enabling, the latter being more directive and goal-focused.

Often, however, there are ongoing projects for which the outcome is less than obvious. They will be burning resources for a long-established goal that may not even be relevant. Conversely, there is sometimes the situation that the world is very different from what it was when the project was sanctioned. COVID is just one example of this. Q1 focuses the mind to help us recognise these situations.

So, what do we do? In Chapter 3, we introduce AcdB, a tool we have discovered to help break down issues and help answer Q1? We like AcdB because it is quick to explain and can be done in an hour or so with the key stakeholders in the room. We introduce AcdB in Chapter 3 because there are many possible ways you can answer Q1 and we do not want to distract you, the reader, from understanding the need for the 6Q Governance questions. Q1 is necessary because strategy is often trying to solve a wicked problem and an iterative process needs to be taken to react as more information becomes available.

How to Know Whether Q1 has been Addressed Adequately

We finish the discussion of Q1 by reinforcing the message that although the relevance of Q1 goes without saying, you would be surprised how often organisations go amiss when addressing this question. We have seen all sorts of projects being stuck in their project 'delivery bubble' very quickly forgetting what the original intent of the project was briefly after getting the strategic go ahead. This doesn't mean blaming the project delivery team for focusing on the time or budget. It rather implies engaging in a continuous conversation about the project outputs and deliverables meeting the long-term strategic outcomes and making sure that the alignment between business objectives and the project deliverables is being met. Think of yourself as the guardian of the ever-changing business/policy brief. You might say that this is already translated into project objectives in the respective brief, but the reality is that policy and strategy change much more quickly than is needed for a project (especially large-scale and complex ones) to be delivered. Therefore, someone needs to engage with the project team to bring the strategic business perspective into consideration, to make sure alignment is there, and to make necessary adjustments at both ends of the strategy and delivery spectrum if the alignment is not there.

To illustrate this point, answer the following question to identify when Q1 has been addressed adequately:

Which of the following project proposals has clearly identified the strategic benefit(s)?

• Buy an exercise machine Y/N1
• Implement an ERP system Y/N2
• Build a bridge Y/N3
• Put a computer on every desk at school Y/N4

We have already pointed out that it is a fiduciary duty of the board and their delegates to ensure resources are spent wisely and that strategy is a responsibility of the board. In each of the examples above, the strategic conversation is not yet complete and as the sponsor, it is your job to call this out and insist that more thought is applied before allowing others to leap into action prematurely.

Q2. How Much Change?

The second 6Q Governance question, Q2, is to make an assessment on how much behavioural change is required to realise the desired benefits. The first 6Q Governance question Q1 is asked to seek clarity on what benefit is being targeted. The second 6Q Governance question Q2 is to evaluate whether the benefit can be realised or not. Recall that the unspoken truth is that half to two-thirds of projects either fail outright or deliver no discernible benefits [3]. Hence, the biggest risk of any project that the governors need to be aware of is that the benefits will not be realised and the strategy/policy is not implemented effectively. It is the responsibility of those charged with the governance of the project to focus on this overarching risk because those at the project management level need to focus on the on-time on-budget delivery of an output that is...