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Guest lecture for Chartered Secretaries of Australia
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© Chartered Secretaries Australia Ltd 2010
Risk and Compliance
Module 8 – Project Governance
Dr Raymond Young – University of Canberra
© Chartered Secretaries Australia Ltd 2010
Agenda
Context & Key Concepts
Best practice
Specific issues: • Cultural barriers
Application: Case study
© Chartered Secretaries Australia Ltd 2010
WHY GOVERN PROJECTS?Context
© Chartered Secretaries Australia Ltd 2010
The role of projects
Business As Usual
Services& Value
© Chartered Secretaries Australia Ltd 2010
BAU performance over time
Impacted by demographic, financial and global forces
Business As UsualServices& Value
Demographicfinancial& globalforces
The role of projects
© Chartered Secretaries Australia Ltd 2010
Projects needed to deliver
significant change
Business As Usual70-80 %
BETTER
Projects20-30 %
The role of projectsproject based organisational change
© Chartered Secretaries Australia Ltd 2010
Oversight blind (29%) or nil (16%)
Increasing degrees of negligence
Level of scrutiny (benign economy)
__% projects perceived to fail
New levels of scrutiny
• Management of large-scale expenditures is a fiduciary duty requiring careful oversight.
The results were “tantamount to negligence”.
Deloitte( 2007) What the Board Needs to Know About IT: Phase II Findings
• “A pay structure that rewards origination without regard to investment outcomes is not appropriate”
Michael Larkin, CEO Babcock and Brown (AFR 11 Nov 2008, p 84)
The case for governing projectsThe Risk and Compliance perspective
© Chartered Secretaries Australia Ltd 2010
¾ of mergers and acquisitions never pay off
2/3 of IT projects deliver no benefits whatsoever
most large capital projects fail to live up to expectations
majority of efforts to enter new markets are abandoned in a few years
70% of new manufacturing plants are closed in their first decade
Level of scrutiny (benign economy)
__% projects perceived to fail
New levels of scrutiny
• Management of large-scale expenditures is a fiduciary duty requiring careful oversight.
The results were “tantamount to negligence”.
Deloitte( 2007) What the Board Needs to Know About IT: Phase II Findings
• “A pay structure that rewards origination without regard to investment outcomes is not appropriate”
Michael Larkin, CEO Babcock and Brown (AFR 11 Nov 2008, p 84)
The case for governing projectsThe Risk and Compliance perspective
© Chartered Secretaries Australia Ltd 2010
Governance
Mic
rosc
ope
ProjectsProjects
On-timeOn-budget
Inside the head of project managers
Young and Jordan 2008
Kwak and Anabari 2009VIC 100b
Young and Jordan 2002StrategyTelescope
© Chartered Secretaries Australia Ltd 2010
Inside the head of boards and top managers
Projects
e-commerceRisk
13 Dir: 60+ boards
Strategy should be developed by management
E-commerce is important but strategy is hard …
3 approaches – (2) get an expertFew have IT background Widespread delegation to mngt / consultants
Young and Jordan 2002
© Chartered Secretaries Australia Ltd 2010
Inside the head of boards and top managers
Telescope
Mic
rosc
ope
ProjectsProjects
Strategy
On-timeOn-budget
Inside the head of project managers
Young and Jordan 2008Fail15%
(Standish 1999,2003)
No30-40%
(Wilcocks and Margetts
1994)
Some35%
OK10-20%
(Clegg et al 1997)
1/3 of projects are successful
and deliver 30% return on
investment
2/3 of projects deliver no benefits
whatsoever
[2] I would have thought it would be the opposite … are
there stats by industry?
[3] valuations are heavily discounted whenever a big IT
project is announced
[4] they hardly ever define adequately
what success looks like
[1] That’s probably about right…
© Chartered Secretaries Australia Ltd 2010
Inside the head of boards and top managers
Projects
On-timeOn-budget
Inside the head of project managers
Young and Jordan 2008
[3] Sponsors definitely drive success … we would need to see a track record
of this working
[4] You’ve definitely got this right by putting the strategy
first
[1] Yes … I think you could sell that. A directors job is to ask questions.
VIC 100b
© Chartered Secretaries Australia Ltd 2010
Financial/Strategic ImplicationsO
KS
ome
No
Fai
l
ROI30%
CurrentPerformance(68% under)
OK
Som
eF
ail
ROI130%
BetterPerformance(43% under)
OK
Can
cel
ROI220%
ExcellentPerformance
(15% cancelled)
Source: R. Young, “What is the ROI for IT Project Governance? Establishing a benchmark.,” in 2006 IT Governance International Conference (Auckland, New Zealand, 2006)
© Chartered Secretaries Australia Ltd 2010
KEY CONCEPTSPolicy/Strategy implemented through Portfolio/Programmes/Projects
© Chartered Secretaries Australia Ltd 2010
Project Governance: Connecting Corporate Governance and Project Management
Standards:OECD GuidelinesASX GuidelinesAS8000
Focus on Vision and Mission (Corporate Plan - normally 3+ years)
Corporate Governance:The system by which organisations are directed and controlled
Standards:PRINCE2 , MSPPMBOK, OPM3
Focus on Outputs e.g. time, budget, quality,
stakeholder support, outcomes
Project Management:The way of guiding and managing projects to ensure successful completion from start to end
Standards:Gateway HB280AS8016www.valuedeliverymanagement.com
Focus on Outcomes Annual Plan
Project Governance:The connection between corporate governance &project management
© Chartered Secretaries Australia Ltd 2010
OutputInitiatives
Project – AS8016 definitionan enterprise carefully planned to achieve a particular aim - Oxford Dictionary
10-year strategic goals
↑ economy, ↑ jobs (↑quality)
↓ crime 5% & ‘feel safer’
↑ health• ↓ waiting times (emergency,
elective, …)
↑ education • ↑ literacy/numeracy• >90% yr 12• ↑ VET participation
↑ transport• ↓ commuting times
↑ environment• ↓ water usage 15%
Asset Investments
Programs asset investments alone generally will not
lead directly to the realisation of strategic goals
© Chartered Secretaries Australia Ltd 2010
A ValIT understanding of Governance
Kubernán (gr): to steer a ship – the process of continually orienting and adjusting
“Managing an uncertain journey to an uncertain destination”
Source: VALIT & John Thorp
© Chartered Secretaries Australia Ltd 2010
From project management to governance of strategic programmes
StrategyDefined
outcomesDelivered outcomes
Benefits
Project
Vision: to improve the social and economic wellbeing through a responsive and sustainable education and training system
State Strategies (S4/S5): increased levels of attainment for all students•Student skills•Teacher quality
Desired Outcomes: •Increase literacy and numeracy
•More completing year 12•Increase participation in VET
Governance
Programme of change
© Chartered Secretaries Australia Ltd 2010
Governanceof Programmes
Programme management
Governanceof Programmes
Programme management
Assessment of tools and frameworksWhere to focus effort to engage top management
Efficiency
EffectivenessAny
benefitsBenefits aligned
to strategyRealisation
of strategic goals
Portfoliomanagement
Pro
ject
M
an
ag
em
entOn-time
On-budget
Avoidduplication
Products/Outputs
Programme PortfolioManagement
Victorianinvestmentframeworks
© Chartered Secretaries Australia Ltd 2010
BEST PRACTICE Enterprise-based Project Governance
© Chartered Secretaries Australia Ltd 2010Business processes
ICT Operations
GovernanceSupport
Changed Business Processes
Changed ICT Operations
Evaluate
InitiateDirect & Monitor
Investment:benefits or terminate?
Strategy/capability: how much change is required?
Investment & Strategy:Benefits / alignment?
Responsibility: Project Sponsor?
Performance & Behaviour:measures and motivation?
67%->40%Business Case
40% ?MSP?
5-23%
33-67%ChangeTracking™
0-13%Benefits Realisation
ITIL, COBITProjects
PMBOK, PRINCE2, etc
Conformance & Behaviour: culture for issues to be raised?
??%
HB280, AS8016, 6Q Governance™
© Chartered Secretaries Australia Ltd 2010
Other Best Practice Guidelines
SARBOX, APM, ANAO (8-3)• Oversight (Q1 –Q4) & Review (Q5-Q6)• Stakeholder engagement (Q1, Q2, Q5)
Failure factors• Unclear goals / requirements (Q1)• Inadequate information (Q1, Q5)• Inadequate resources (Q2)• Poor communication / management (Q5)• External events (Q5)• Unproven technology
© Chartered Secretaries Australia Ltd 2010
SPECIFIC ISSUESTechnical skills and cultural barriers
© Chartered Secretaries Australia Ltd 2010
Public-Private Partnerships• Procurement • Contracts• Outsourcing
© Chartered Secretaries Australia Ltd 2010
Source: VALIT & John Thorp
Can’t kill projects
Leads to..Leads to..
Too many projects
Quality of execution suffers
Underestimation of risks and costs
Projects not aligned to strategy
Over budget
Projects Late
Business needs not met
Lack of confidence (in IT)
Results in..Results in..
Benefits not received
SituationSituation
Reluctance to say no Reluctance to say no to projectsto projects
Lack of Strategic FocusLack of Strategic Focus
Projects are “sold” on Projects are “sold” on emotional basis -- not emotional basis -- not
selectedselected
No strong review processNo strong review process
Overemphasis on Overemphasis on Financial ROIFinancial ROI
No clear No clear strategic criteria strategic criteria
for selectionfor selection
Without Effective Governance…
© Chartered Secretaries Australia Ltd 2010
Cultural barriers:
• Boards and top managers may have to accept that they personally have the most influence whether a project succeeds or fails
• Boards, top managers and their advisors may have to accept that the current ‘expert advice’ has less impact on success than previously believed.
© Chartered Secretaries Australia Ltd 2010
CASE STUDYAddress one or more case studies as time allows
© Chartered Secretaries Australia Ltd 2010
Situation problem 1 (8-19)
The Department of Foreign Affairs and Trade (DFAT) has embarked on a major IT and associated core systems redesign project to better coordinate and streamline intelligence data from various Commonwealth agencies, most of which are under the Attorney-General’s portfolio (Federal Police, ASIO, ASIS, Office of National Assessments) and foreign embassies, many of which are considered sources of intelligence used by, or of interest to, the above security agencies.
The project will be undertaken over eight months concurrently with a major review of the overall powers and responsibilities of the various national security agencies sponsored by the Prime Minister and his National Security Advisor.
The project is due to report on a three-monthly basis to the National Security Committee (NSC) and has a weekly review by a DFAT steering committee, with one ex-officio representative from the Attorney-General’s Department nominally representing all the National Security Agencies.
© Chartered Secretaries Australia Ltd 2010
Situation problem 1 (8-19)
You have been asked to write a report detailing the main governance issues and risks to this project’s success and provide strategies or changes to the current project design to address these problems.
© Chartered Secretaries Australia Ltd 2010
Q1 Semester 2, 2009
The Department of Social Security (DSS) has decided to outsource its hardware acquisition and maintenance to a commercial service provider. The DSS is establishing a project to select an appropriate outsource partner and to transition the relevant applications to the successful party.
DSS has clients who number in the millions and who rely on the benefits they receive as an essential part of their livelihood. DSS systems must be able to deliver the payment of benefits on time and without fail. Failure to do so can result not only in hardship for the clients but in political embarrassment for the government. The transition to new maintenance and development arrangements has the potential to cause disruption to service delivery and to inconvenience the front line staff responsible for client liaison.
DSS systems link to other government agencies. The most important are the ATO and the Department of Health and Ageing.
DSS expects to achieve both operational efficiencies and financial benefits from the outsourcing, including a lower cost of delivery of the relevant IT services.
© Chartered Secretaries Australia Ltd 2010
Q1 Semester 2, 2009
Provide the major factors which the DSS will have to take into account in establishing the project.
Recommend the steps that will need to be taken to ensure:• successful selection of the outsource partner,
• transition to the new arrangements
• and effective management of the outsource arrangement after the implementation.
© Chartered Secretaries Australia Ltd 2010
Questions & Discussion
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