Governance and Program management - how do they interrelate?

Governance is a complex area that means different things to different audiences. Similarly the field of Program Management is established and well documented.

This article offers a simple model for these methodologies need to interrelate in order to ensure that organisations can reach their strategic goals and manage their risks through programs of work.

Program / Project (P/P) Governance / Management

P/P governance are the management framework(s) within which P/P decisions are made. Therefore, the role of P/P governance is to provide a decision making framework that is logical, robust and repeatable to govern an organization's capital investments. The principles of best practice PP governance are to ensure:

• Outputs (for projects) / Outcomes (for programs) are clearly identified, defined and agreed by all stakeholders.

• Clarity around, roles, responsibilities and who is accountable for the P/P.

• The sponsor and the P/P decision making body is authorized to make decisions.

• Decision making is not constrained by stakeholders (whether it be due to lack of knowledge or conflicts of interest).

• Controls are in place for the appropriate review of risks and issues and clear decision points are defined at appropriate stages within the project.

• The necessary agility and flexibility is in place to ensure programs of work are durable yet adaptable enough to keep pace with changes in corporate strategy.

Adoption of a robust P/P framework removes multi layered decision making and the time delays and inefficiencies associated with it.

Investment Governance / Management

Investment governance encompasses the combination of individuals filling executive and management roles, program oversight functions organized into structures (committees, boards etc), and policies that define management principles and decision making for all the programs/projects within an organisation.

Investment governance should there incorporate the following elements:

• An approach to the prioritization of projects within the pipeline that considers the asset management lifecycle and therefore maintenance and operational costs.

• Decision making bodies who have the authority to accelerate, decelerate or permanently hold a project in order to maximise the overall investment from all projects.

• Clear and consistent decision making points across the program/project lifecycle.

• Investment controls including deep dives and reviews to independently assess the health of a project in comparison to others within the portfolio / program.

Investment governance should therefore be wholly owned by senior management but be aligned to the strategic direction defined by the board.

Corporate Governance

The ASX Corporate Governance Council (ASXCGC) defines corporate governance as

“the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations. It encompasses the mechanisms by which companies, and those in control, are held to account”.

These guidelines have recently been updated to reflect a range of concerns held by some or all of the 19 bodies that comprise the ASX Corporate Governance Council. This update was well timed and means the guidelines reflect the findings of the Hayne Royal Commission.

The updates expanded on the definition of governance to include culture: "a listed entity should articulate and disclose its values."

Corporate governance is the accountability of the board of directors. The board is required to perform the following key roles:

• Develop the Strategic Direction and define the Risk Appetite.

• Allocation of Resources (in order to achieve the strategic plan).

• Monitoring performance whilst ensuring compliance.

• Accountability to reduce conflict and ensure decision making is independent and robust.

Corporate governance therefore defines the requirements by which investment governance can be built as the strategic direction and risk appetite of an organisation will effect the types of investment and therefore projects and programs an organisation looks to invest in.

Summary

The framework of PP management are fundamental components of corporate governance. They help organisations ask the important questions including "Why are we making this investment?" and "How and when will we measure if we are being successful"? Similarly projects / programs need to be aligned to corporate strategy and define how their outputs / outcomes will benefit the organisations long term goals, strategy and risk appetite.

The critical fundamental is to ensure that any governance framework incorporates all elements of process in a seamless interrelated manner that is devoid of inconsistencies. In the case of divisions / organisations which manage programs and projects of work, this is likely to include substantial components of program and portfolio management.