Board readiness to govern projects

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Information about Board readiness to govern projects
Business & Mgmt

Published on July 10, 2009

Author: drryoung



See my blog for commentary

GOV 112 Boardroom Readiness for Business Project Governance Dr Raymond Young Thought Leader – Project Governance MBA MAICD The Frame Group

Background Why? Why? Why? 1989 1999 2009 projects, projects, projects …

A major shift in accountability is required • The key to realizing business value from IT projects is support from the board and top management. • Conventional approaches have focused on project management and technical issues. • This presentation will present research that explores the level of readiness among Australian board Governance members to make this shift in accountability. PMBOK, PRINCE2, etc COBIT ICT Projects Changed Operations ICT Operations Changed Business processes Business Processes

… work in progress If it does not relate to boardroom concerns, then it is not governance • AICD Company Directors Course • Interviews with company directors – Director 1: Chair & member of multiple boards – Director 2: member of multiple boards with IT experience – Director 3: CEO of funds management company – Director 4: Consultant and AICD trainer – Director 5: – Director 6: – Director 7: – Director 8:

AICD Company Directors Course • Module 1,2,7 (legal); 5,6 (financial); Module 3,4,8,9 (risk, strategy, decision-making, effectiveness) • Module 4: Strategy (& Strategic Execution) “More shareholder value has been destroyed in the past five years as a result of strategic mismanagement and poor execution than was lost in all of the recent compliance scandals combined” Booz Allen Hamilton 2004 “While it is neither the board’s job to develop implementation plans nor to manage their execution, the board does need to understand management’s capacity to deliver the promised outcomes…” Good Execution 4. Keep it simple, make it concrete 5. Debate assumptions, not forecasts 6. Use a rigorous framework, speak a common language 7. Discuss resource deployment early 8. Recognise the importance of organisational culture 9. Lead change and clearly identify priorities 10.Continuously monitor performance

AICD Company Directors Course • Module 8: Decision-making “Decision-making is a process rather than something that occurs in a single point in time” p7 “The process … begins when we need to do something but we do not know what” p8 “the higher up an organisation one goes, complexity of problems increase, along with the risks … making the need for structured and rigorous decision-making processes, appropriate for the context, more important” p9 “People in organisations such as managers must pass through stages in mastering greater and greater complexity. This is not a matter of handling more and more information, but learning what information is important – what not to think about – to focus on what is really important” Jaques (1998) “When a person is out of their depth in terms of the level of complexity they have to handle, they will implement mechanisms to maintain control such as cutting the debate, seeking to silence people … often unconscious behaviours designed to avoid their own lack of understanding” p11 “A lack of judgement must lead to failure eventually … when people make poor decisions … they often cannot see what they have done wrong” p9 Traps in individual decision-making: anchoring, escalation, status quo, overconfidence, optimism, confirming evidence, framing, false consensus pp23-25 “most large capital investment projects come in late and over budget, never living up to expectations” (Lovallo & Kahneman 2003)

Interview Protocol • Introductions 2. Perception of project success rate 3. How significant is this issue on boards? (that you are familiar with) 4. Comment on Australian Standard AS8016 (draft)

Perception of success rate [2] I would have thought 1/3 of projects OK it would be are successful 10-20% (Clegg et al 1997) and deliver 30% the opposite return on … are there investment [4] they stats by Some hardly ever 35% industry? define adequately what success 2/3 of projects looks like deliver no [1] That’s benefits No [3] valuations 30-40% probably whatsoever are heavily about right… (Wilcocks and Mar getts discounted 1994) whenever a Fail 15% big IT project is announced 003) (Standish 1999,2

Significance at board level High [1] the challenge is to bed down the last several Compliance years effort and [4] accountability do compliance for strategy is without taking up Medium getting there all our think time [1] efficiency is [3] a venture only a should do … capitalist might be interested Low [2] what can we do?

Comment on AS8016 (draft) [4] You’ve definitely got this right by putting the [1] Yes … I think strategy first you could sell that. A directors job is to ask questions. Human Behaviour • The measures of success are aligned to stakeholders’ needs and [3] Sponsors motives. definitely drive • Stakeholders are success … we effectively encouraged to raise issues … would need to see a track record of this working [2] the trouble with standards is they are written so that everyone [already] complies

Summary • Are boards ready? – there appears to be an awareness of the issue at the board level and some willingness to deal with it – The AICD Company directors course acknowledges the issues – IT issues at AICD conference are always well attended – But … there is a shortage of mental bandwidth • We need to make it easy – Talk about strategy – focus on what success looks like – Talk about the role of the sponsor and the role of the board – KISS – Focus on the 6 key questions around the various stages of a project lifecycle

Questions & Further Discussion

Economic Value of Project Governance ROI ROI 240% ROI 135% 30% OK OK Some OK Current Better Excellent Performance Performance Performance Some Cancel (68% under) (43% under) (15% cancelled) Fail No Fail

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