Rise of the Project Workforce, Chapter 3: Project Governance

For more details about project governance, see Rise of the Project Workforce.

Project and workforce governance roadmaps should be designed to address the potential threats associated with:

  • Cost and Revenue Accounting
  • Portfolio and Project Processes
  • Corporate Governance

This chapter identifies enterprise-wide threats and uses a symptom – cause – solution format to highlight steps executives need to take to effectively manage risk and reduce the likelihood that any of these threats may damage their business.

Cost Accounting

Related to cost accounting, we identify project governance issues in the areas of budgeting, chargebacks, timesheet management, travel and entertainment expense management, revenue recognition, and capitalizing costs.

The symptoms of cost accounting governance issues include: projects that are over budget, late, or failing; inability of project managers to plan projects effectively, or track costs accurately so that internal departments can be charged or external departments can be billed; inability of managers and executives to get timely, actionable reports; the inability of finance to determine recognized revenue and costs that should be capitalized and not expensed.

The threats of not dealing with these issues include not only failed projects, but the general inability to execute on corporate strategy, because important financial data is not available to project managers and executives. Moreover, under these conditions the finance department will have difficulty performing in nearly every way; lack of accurate data can easily lead to erroneous forecasts, inefficient invoicing, late payrolls, tax problems, and incorrect—and illegal—financial reports.

The causes of these problems are generally the inability to collect and manage accurate data from the many areas of the company. In some cases, the corporate culture does not support basic data gathering functions such as the tracking of time and expenses, measurable project status, and billable project milestones. Usually, the company lacks the processes and tools to collect this data, or has various processes and tools in separate departments.

The solutions to the problems, in all cases, require company leadership to implement top-down processes that allow accurate data collection and management, and real-time reporting.

Portfolio and Project Processes

Here we describe the processes of managing a company’s portfolio of projects, under the categories of: templates, methodologies, and best practices; status, health, and milestones; initiation and approval; risk management; issue management; change control; and pipeline analysis.

The symptoms of problems include: frequent change in project status, and surprising delays and budget overruns; Competition between projects and departments for project resources; inability to manage project risks and changes; lack of responsiveness to issues that arise.

The threats of these problems are: management lacks an enterprise-wide view of all of the company’s current and proposed projects, and therefore has no ability to allocate and manage resources or prioritize the company’s activities strategically.

The cause of these problems is typically that project management is not recognized as a necessary and critical business function. Therefore, no formal processes or tools are in place to approve new projects, manage resources and work-in-progress, or control risks, issues, and changes.

The solutions begin with establishing a central project management office (PMO) to define and enforce project management standards and best practices, and provide the right tools to promote enterprise-wide project management. These standards include project initiation methodologies, processes for tracking project status and milestones, policies for proposing and approving projects, workflows for risk management, and policies for managing issues and proposed changes.

Corporate Governance

This section addresses Sarbanes-Oxley sections 404 and 409 (internal controls and rapid reporting), and 802 (destruction and falsification of records), in addition to labor laws, accounting regulations, and risk management standards for financial institutions.

The symptoms of problems largely center around audits: the company has difficulty providing all the information demanded by an audit; too much time is spent preparing for audits and avoiding legal liability instead of running the business.

The overall threat of lack of compliance is to fail an audit or face legal charges.

A frequent cause of governance issues is manual record-keeping, based on separate spreadsheets, documents, emails, memos, reports, invoices, and so forth. Important information is easily lost or destroyed.

The solution requires companies to centralize and automate its record-keeping, and implement workflows that establish approvals and accountability.

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