Understanding Governance

My last post looked at developing a grounded definition for the governance of PPP based on established definitions for corporate governance (see: Defining Governance – What the Words Mean) .  This post looks at how the definition can be put into practice to govern an organisation doing projects and programs.

An organisation is governed by its ‘governing body’ which, depending on the nature of the organisation, may be an individual, a small group, a committee or a formally constituted board of directors.  Whilst this statement may seem obvious, it is vitally important! The governing bodies job is to represent the interests of the organisation’s owners and to appoint, direct and oversight the organisation’s management (see more on organisational governance).

Within the organisation, the workers are appointed, directed and overseen by management, management is appointed, directed and overseen by the executive and the executive is appointed, directed and overseen by the governing body. However, whilst the governing body has responsibilities and obligations to both the organisation’s owners and other external stakeholders, within the organisation, the governing body is self-governing and very often self-appointing (in practical effect if not always in theory). And unlike management which is hierarchal, within most Boards the legal assumption, and general practice, is that all of the members are equal .

 

Governance Structure

The key responsibilities of the governing body are:

  • Framing the values and ethics of the organisation
  • Appointing the CEO and other key executives
  • Developing and maintaining the organisation’s strategy in collaboration with the executive
  • Ensuring an appropriate management system is developed by the executive (see more on governance and management systems)
  • Surveillance of the performance of the organisation
  • Stewardship of the organisations resources and assets
  • Taking appropriate actions to support the needs of stakeholders and sustainability (CSR).

The ‘governing body’ cannot achieve these responsibilities alone, management support is essential. However whilst the governing body can and should delegate aspects of the organisation’s governance processes to management and should hold management accountable for their performance, the ‘governing body’ is ultimately responsible for the actions of the organisation it is governing, including the actions and failures of management.

A Governance Framework

The Australian Institute of Company Directors (AICD) has developed a comprehensive Corporate Governance Framework to help directors understand their responsibilities and develop the skills they need to serve effectively on a ‘governing body’.  The framework sums up the practices (skills, attributes and expertise) that comprise good director practice as demonstrated by responsible directors.

It is designed as a wheel that has four quadrants depicting the four key areas of focus and engagement applying to every individual director: individual, board, organisational and stakeholder. Each quadrant is divided into a number of slices representing director practices essential to the quadrant’s focus (the different sizes of the slices do not represent the relative importance of the topic).

 

Together with the AICD’s Guide for Directors and Boards: delivering good corporate governance, which articulates a set of values and principles that underpin the behaviours and practices of sound directorship, the framework provides a solid basis for developing the skills needed to ‘govern’ an organisation.

AICD GovFramework

Governing Projects, Programs and Portfolios (PPP)

Whilst the inclusion of stakeholders as one of the four focuses is something I strongly applaud, the governance of PPP is focused in the ‘green quadrant’ and really only connects directly into a couple of the sub-sectors, primarily, implementing the organisations strategy (3.3.1). Therefore, a different frame is needed to understand the governance of PPP in the overall context of governing an organisation.  This reframing consolidates many of the personal responsibilities highlighted in the AICD framework whilst retaining the core tenet that governance is a holistic process and a significant failure within the PPP domain can have ramifications across the entire organisation. The ‘petal diagram’ below is our attempt to reframe the concepts of governance is it is affected by, and affects the PPP domain.

The Governance ‘Petal Diagram’

The ‘petals’ seeks to aggregate the various functions of governing the organisation into the five main themes, whilst other aspects of governance such as the performance of the ‘governing body’ and of individual directors have been largely omitted for clarity. The importance of these ‘other’ functions from the AICD perspective of developing the competence of directors is crucially important; the ‘petal diagram’ assumes competent directors and an effectively functioning board and focuses on the board’s role in governing the organization.

The domain of PPP is focused on implementing the changes needed to fulfil the organisation’s strategy and therefore, the processes of PPP are grouped in the ‘Governing Change petal’.  The other ‘petals’ are aspects of governance and management that affect, or are affected by the change processes.

Governance Petal Diagram

This petal diagram is a synthesis of several sources focused on various aspects of governance that are associated with projects, programs and portfolios. The primary source is the AICD ‘Company Directors Corporate Governance Framework™’. discussed above.

Secondary sources are a series of Standards that focus on the governance of projects and ICT, including:

  • Directing change: A guide to governance of project management (APM, 2011) (download from here);
  • AS 8015-2005 corporate governance of information and communication technology (AS8015, 2005); and
  • AS/NZS 8016: 2010 corporate governance of projects involving information technology investments (AS8016, 2010).

Within the ‘petal diagram’ some of the specific references are:

Values — Yellow section

Vision

•   GoPM: Assure the continued development of the organization
•   AICD Value: Leadership

Values & ethics

•   AICD ‘Ethics’ are a key sub-set of values

Corporate social responsibility

•   AICD 4.4 Society and Community

Governing of the Board

•   AICD Segments 1 and 2

Principle functions of governance — ‘the petals’

Governing relationships

•   AICD Quadrant 4

Governing change

•   AICD 3.3.1 Strategy
•   GoPM (full document)
•   AS8016 (full document)

Governing the organizations’ people

•   AICD 3.2.1 Executive Team
•   AICD 3.1.3 Culture
•   AICD 3.1.2 Policies and Assurance

Financial governance

•   AICD 3.1.3 Corporate outcomes—financial

Governing viability and sustainability

•   AS8016 1.4.3 (e)
•   Cadbury and others

From within this overall governance framework, the more specific aspects of governing PPP can be established (see more on governing PPP).

The two key takeaways from this post should be:

  1. Governance is a holistic process, and the ‘governing body’ has exclusive accountability and responsibility for the effectiveness of the organisation’s governance.
  2. Governance and management are quite different functions.

For more posts on governance see:https://mosaicprojects.wordpress.com/category/governance/

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