Project Governance – The Definition and Leadership Dilemma

Abstract

The terminology, definition and context of project governance have become a focal subject for research and discussions in project management literature. As a very current topic in both academic research and practice, various attempts have been made to define the concept and construct of project governance as well as providing practical guidelines to project leaders. In parallel the International Standards Organization (ISO), through a sub-working group of Technical Committee TC 258, is in a process of developing an International Standard on the Governance of Projects, Programmes and Portfolios, which will contain guidelines on project governance principles. From an in-depth review on current project governance literature it became evident that the conceptualization of project governance has thus far been driven from a ‘project management’ point of view. The majority of authors on project governance are from a project management background, attempting to construct a framework through a bottom-up approach. Given the wide range of industry specific projects, different types and values of projects, varying stakeholder interests as well as complexity spectrum, the bottom-up approach has its limitations when providing concise guidance to leaders, when exercising and enforcing project governance. Based on this observation the objectives of this research article were three-fold. Firstly, investigate the concept of project governance from a ‘governance’ point of view instead of the ‘traditional’ project point of view. The second objective of the study was to identify the factors causing disparity and differences in opinion towards the conceptualization of project governance. In conclusion the approaches towards governance, in relation to project classifications, are integrated to propose a conceptual project governance framework for project leaders.As part of the first objective, the origin of governance, its justification, intent and construct is reviewed and discussed with specific reference to principle-agent theory and development theory. The evolution from governance towards corporate governance is dependent on the varying country approaches towards the definition, framing and application of governance principles. It was observed that country approaches towards corporate governance vary from strict financial controls in the form of legislation, to emphasis on social responsibility. From the country review on corporate governance practices it became clear that a ‘global’ corporate governance guideline is required to ensure a common approach towards business conduct in terms of financial performance, environmental, socio-economic and sustainability requirements.From current literature, three different approaches towards project governance were identified. These approaches were classified in three ‘schools of thought’, namely the single-firm school, multi-firm school and large capital school. The single-firm school is concerned with governance principles related to internal organizational projects, and practices these principles at a technical level. Projects associated with the single-firm school include information technology projects, capital expansion, business improvement, restructuring projects, etc. It was also found that, even though reference is made to project governance, the terms used to ‘govern’ includes ‘control, manage, supervise, monitor, strategic fit, resourcing, etc.’ The multi-firm school addresses the governance principles concerned with two or more organizations participating on a contractual basis on the same project and focus their governance efforts at the technical and strategic level. Words used to ‘govern’ in the multi-firm school, include ‘relationships, agreement, collaboration, contracts, protection, etc.’ The large capital school considers projects as temporary organizations, forming their own entity and establishing governance principles at an institutional level. From these schools of thought it can be concluded that the definition of project governance is a function of stakeholder complexity and functional positioning in the organization. Words found to ‘govern’ in the large capital school are ‘politics, policy, principles, guidelines, decision-making, socio-economics, front-end, external stakeholder interest, ethics, etc.’The study concludes by providing an integrated approach for leaders towards the definition of project governance that considers the various country approaches towards corporate governance. It further proposes an inclusive, conceptual project governance framework with principles and elements to be converted in project and organizational specific project governance frameworks and guidelines for project leaders to refer to. The development of project governance frameworks should also consider the complexity of projects spanning across international companies, across country borders and incorporating different value systems, legal systems, corporate governance guidelines, religions and business practices.