Project outcomes should receive elevated recognition in company reports. Shouldn’t they?
Project outcomes are important to company performances, so you might expect their significance, and assurance of proper governance and management, would receive appropriate recognition in company reports. Or would you?
Capital and transformation programmes and other projects can be crucial to a company’s survival and profitability. There are many cases where inadequate governance or management of projects has been a major factor in a company’s failure or rapid demise. Traditional auditing of the accuracy of a company’s accounts will not identify failures of governance of project management. Our research has shown there is a near total failure to mention the importance of projects or governance of project management in company reports.
The APM Governance Specific Interest Group believes that a specific discipline is necessary to counter this absence. For many companies, successful delivery of projects is intrinsic to achieving strategic organisational goals. However, the success rate for project outcomes (and thereby strategic goals) is less than satisfactory, and this failure has been shown to be mainly down to poor governance. There is no one single silver bullet to improve this situation.
However, one aspect to help improve this situation, we believe, is for the company’s Board to state in their published accounts how important projects are to their business and that they have adequate scrutiny of governance of project management in place. The external auditor would then be able to identify and comment upon strengths and weaknesses in their governance of project management.
Some organisations don't have projects of the number, type or scale of a BP, a Department for Transport or a Carillion. However, from time to time they do have projects, as opposed to business as usual activities, that are quite large and critical to their business - such as a new facility, product or a major system upgrade. The Board should satisfy itself that there is thorough scrutiny of the internal governance, project management process and competence – and if a major delivery partner or contractor is involved, also scrutinise that partner’s arrangements.
Where projects are important to the organisation, we would expect a statement in a company report, on the lines of “projects are important to this company because...” and “your Board are satisfied that adequate governance, competence and management is in place, including appropriate policies and procedures.” Alternatively, “projects are not important to this company’s day to day work because...Accordingly no particular provision has been made in our policies and procedures.”
Over the last six months, we have examined the company reports of selected organisations across several market sectors. They make little or no reference to the governance of project management. If this changes and there is more recognition of project outcomes, it can change the fate of a company; we’d be able to spot the reasons why projects fail and change it.
Don’t you think it would make a difference? Should they make mention? What should the statements say? How important is this issue for your organisation? Do you have any evidence of relevant statements from your organisation? Please contribute to the debate in the comments below or on the APM Community.
This blog is co-written by John Caton and Suzanne Davison, Deputy Chairs of APM Governance SIG
Suzanne Davison is a Chartered Governance Professional ("ACG"), Professional Member of the International Compliance Association ("MICA") and PRINCE2 Practitioner. Her company secretarial and project management roles in UK and US privately held and publicly listed companies and the public sector have given her experience in the fields of construction, advertising, healthcare, electronics, banking, insurance and IT. She has been a member of the GovSIG since 2005, contributing to the production of three of its Guides. She also serves on the North London Area Volunteer Board of educational charity, "Young Enterprise", helping its "Company Programme" students to improve their employability skills.
John Caton is an economics graduate from London University in 1969. Career in project management, quality management and supply chain. British Aerospace 1969-88. Training instructor with a Costain consultancy 1989-91. Consultancy services, 1991-2012, to London Underground, Spillers Petfoods, Natural History Museum, Israel Railways, Birds Eye Iglo, Gatwick Airport, Balfour Beatty and Kuwait Petroleum Espana. John joined CILT in 1979, APM in 1989 and the CQI in 1998, John became a founder member of the APM Governance SIG in 2003 and has participated in all its major publications.
3 comments
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Suzanne / John - this is an excellent insight into an issue that will not be fixed in the short term but needs addressing. We know from the IoD annual governance review of FTSE100 companies that none of their 40 assessment components were concerned with projects / change. this must be rectified - as you say "inadequate governance or management of projects has been a major factor in a company’s failure or rapid demise". Maybe it is the NEDs that can bring about this change by challenging Boards more on the governance of their strategic portfolios and the impact of that - and insisting that the Board gets good quality forecast data regularly and how well / how much confidence the Board has to meet the outcome goals of their strategy - I see a lot of mumbling and looking down at the table with that sort of challenge!
John and Suzanne are absolutely right on this. It has been a grave omission. The issue of our three APM guides on this topic is an enabler, but I doubt companies will adopt the proposed practice without legislation. For Boards, lack of scrutiny on their Governance of Project Management is a valued area of freedom they are reluctant to surrender. Also they rightly fear the audit process involved. Auditors will start counting ratios of certified project managers to project costs or some other meaningless metric. A statement as John and Suzanne propose, I suggest in either the Strategic Report or the Corporate Governance Statement would be very welcome and focus Boards minds on this important issue.
As Martin says, the issue will not be solved in the short term, but pending a legislative, or other externally imposed requirement, this is an area where the Company Secretary can work with the Chairman of the Board to ensure that scrutiny of governance of project management is routinely carried out at Board meetings and is given high priority in the order of business and sufficient time for meaningful discussion. The non-executive directors can be invited to stipulate the type, format, quantity and frequency of information that, when included in their Board meeting packs, will enable them to make a reasoned judgement on the state of the company's governance of project management. The Company Secretary can also work with the executive directors, and their teams, to ensure that, as far as possible, the information required by the Board can be developed by adapting and enhancing existing project reporting materials, mechanisms and timetables. The Board's Nomination Committee could also include "demonstrable track record in successful governance of project management" as a requirement in the person specifications it draws up in consultation with executive search firms, when recruiting to director and other senior leadership roles in the company. Periodical Board evaluations - internal and external - could also be designed to include an assessment of how effectively, or otherwise, the Board reviews and challenges the company's governance of project management.