The Cascading Effect of Poor Project Governance

Projects can fail as a result of poor decisions or management at any stage from the initial tendering through to procurement and delivery. Almost always, the delivery team gets the blame, but a closer look reveals there may be other issues.

According to recent research by Caravel Group and Melbourne Business School, major project success rates in Australia are around 40-50% and this poor result can be attributed primarily to failures in governance.

These are the findings of a ‘self-assessment’ survey of approximately 100 public and private sector board, CEO and senior management-level project participants across a range of industries.

Governance at it’s worst?

We’ve seen the catastrophic results of poor governance play out with the Queensland Health Payroll disaster. In his recent report into the matter, Former Supreme Court judge Richard Chesterman QC plainly states “The replacement of the Queensland Health payroll system takes a place in the front rank of failures in public administration in this country. It may be the worst.”

In his report, Chesterson identifies numerous failures on behalf of both the State’s management and the supplier, IBM. But regardless of the blame and finger-pointing that takes place in the aftermath of a failure like this, it’s difficult not to draw the conclusion that better Project Governance could have led to a much different outcome.

Lessons to learn

The payroll fiasco will most likely be remembered for the pricetag – an estimated $1.2 billion in taxpayer dollars to remedy a $98m project – but according to Ken Lowe, Managing Director at Systemix, a Melbourne firm specialising in the management of complex projects, those close to the industry can learn much more from the findings.

Ken has been brought in to recover more projects teetering on the edge of failure than he can remember and in picking back over what’s gone on, he has to agree that in too many cases, governance was almost always found lacking.

“Often it takes some time before a (governance) team can acknowledge something is seriously wrong, even though failures usually don’t just happen. There is always a string of poor decisions that ultimately culminate in issues that simply cannot be ignored any longer.” says Ken.

Time Pressures and Project GovernanceThe real reasons for failure

It would appear that in many cases, human issues can get in the way of making good decisions or failing to recognise bad ones quickly enough in a governance team.  The reports highlighted in this article, as well as Ken’s experience reveal that good governance can be hijacked by conflicting motives, team dysfunction, accountability issues, poor leadership and even a lack of understanding of the true meaning of governance.

Graeme Cocks, Melbourne Business School Professor says “Too many governance teams are stacked with ‘stakeholders’ to secure buy-in rather than people with proven ability to govern projects. These people are often heavily conflicted and have no accountability for their project governance role.”

There are numerous instances in the Health Payroll Enquiry that also highlight how human issues impacted on outcomes. In fact, the summary of the enquiry is littered with human failings, stating that much of the trouble came down to ‘unwarranted urgency and a lack of diligence on the part of State officials.’ And in relation to a particular aspect of the IT, it is believed that fear of failing motivated poor decisions; ‘Decisions were made to press on regardless of other considerations which ought to have had a bearing on the direction of the Project.’  Lines of responsibility were blurred, and obvious conflicts of interest ignored.

“There are two key elements to good governance. The quality of the decisions made, and the quality of the team making those decisions: The two work hand in hand.” Says Ken Lowe.

The purpose of governance is to ensure a project meets the desired outcomes. The governance team is the advocate of the owners. It is tasked with the role of providing clarity around accountability and responsibility, and ensuring clear lines of communication exist at all levels.  Once this framework is in place the governance team provides oversight and monitoring around fulfillment of the strategic intent as defined in the agreed business case.

A governance team should operate within an agreed governance plan.  Its members should have a mix of skills and experience to ensure that there is an understanding of all aspects of the specific project and (importantly) of governance principals.  The most common departure from these principals is around conflicts of interest, usually arising from stakeholder representatives.

Systemix works with large organisations, public and private, on high-yield project performance solutions. The Systemix heritage was built largely on our expertise in commercial modelling and commercial alignment processes.  With a deep understanding of the systemic interplay between the commercial and psychological contract, Systemix has successfully established the commercial basis for many projects, programs and services agreements.