IT Project Governance for Manufacturing Organizations

EXECUTIVE SUMMARY

The overall concept of IT project governance is the processes that ensures appropriate priority and decision-making across projects or initiatives that enables an organization to achieve its goals. Project governance provides objective oversight and maintains organizational focus on the business priorities while balancing resources and constraints.

It is our experience that practicing solid governance methods – including project management disciplines, proactive risk management, along with clear and frequent communication – not only increases the success factors of projects, but also establishes greater trust, teamwork, and confidence in the project team(s). A robust governance approach leads to effective business process improvements with higher return on investment (ROI), faster payback, and better business practices throughout the organization.

THE BUSINESS CASE FOR IT PROJECT GOVERNANCE

Why Project Governance is Important All too often companies embark on multi-million dollar initiatives without agreed priority, defined accountability, and overall clarity of responsibilities. While change is expected, the value or purpose of the change and how it fits into the bigger picture often lacks understanding. Additionally, the effective management of change is too often marginalized to encompass only a periodic newsletter or series of email announcements. Justifiable success factors for project governance include:

Clear accountability for project success. Identifying a single point person who has ultimate responsibility for the project. This person is held accountable by the governance board for the planned execution of the project activiites according to expectations.

Effective priority managment across all other business initiatives/projects. Setting clear priorities that are based on objective criteria centered on ROI, payback, and business alignment.

Appropriate resource allocation and affordable targets. Managing the portfolio of projects, timelines, and business objectives to prevent the overallocation or competition for resources.

Visibility to the portfolio. This is necessary for broader understanding, support, and contribution throughout the organization.

Take the case of an ERP software implementation project. When an initiative receives approval for funding, project teams and stakeholders are excited to get started so they create momentum with company-wide newsletters and other announcements related to the project. Unfortunately, this hype is often short-lived as the team gets so busy with the project details that they cannot sustain the communication momentum. Equally detrimental is when less important business activites get in the way and pull resources from the project. This results in a diminished level of support and raises questions that affect the overall project success. Without a governance process, management will often turn their attention toward other priorities thinking that the team is off and running with lots of energy, only to be disappointed later as they discover they are struggling.

How IT Governance Works IT governance covers far more than simply selecting and implementing software. The experience of leading hundreds of IT initiatives and ERP projects has shown us first-hand what works in IT governance. Organizations need to gain understanding of what project aspects will have impact on them, both for internal and external sources. Proactive measures are also required to provide early indicators of risks as well as to track progress, achieve confidence, and ultimately realize the value add results for such an investment. Project milestones instill a sense of team accomplishment coupled with readiness assessment decision gates to add the necessary governance controls for management to review progress, assess risks and organizational change dynamics, approve next steps, and evaluate overall priorities, constraints, and success factors. Top management needs to understand the scope of deliverables and have assurances to the overall business impacts (both positive and negative). Management needs to prepare the organization for training and execution of the new operational processes and technology tools. A lack of clarity and transparency in the decisions surrounding a major corporate or organizational initiative can lead to organizational unrest, reluctance to change, employee disatisfaction, and distrust.

THE SCOPE OF IT GOVERNANCE

Keeping focus on the governance covering the culture, organization, policies and practices will provide oversight and transparency to your portfolio of major initiatives. In our experience working with mid-market manufacturing clients, there is proven wisdom in applying appropriate controls across five key areas:

• Alignment – This provides a strategic linkage of the initiative to the business priorities and objectives.
• Value Delivery – Confirms that the business value in terms of ROI and total cost of ownership (TCO) is defined and establishes accountability for the ultimate realization of that return over the long-term.
• Risk Management – Ensures that processes are in place to proactively identify and mitigate risks with appropriate escalation channels.
• Change Management – Ensures the full scope of direct and indirect resources across the organization have clear understanding of the purpose and expectations of the changes; are embracing the required changes; and are prepared and ready to move forward with success. Within change management is a resource management component which establishes direction and expectations along with clearly defined roles and responsibilities for the team members and the organization as a whole. Resource management also includes third party sourcing requirements with quantified additional supporting resources as necessary.
• Performance Measurement – Tracks the progress of the project delivery to maintain accountability and expectations but also substantiates the value added operational performance long term. Not a One-Time Effort Governance is not a one-time exercise that kicks in at the start of a project, nor is it achieved by a mandate or setting of rules. Instead, governance requires a commitment from the top of the organization to instill a better way of dealing with the management and control of all projects and their respective sustainable operational performance. Effective governance practices are designed to mitigate these concerns and can maintain the disciplines necessary to successfully implement major change initiatives with employees who are adaptive, trusting, and motivated for organizational success. Governance is an ongoing activity that promotes a drive for continuous improvement and responsiveness to changing business needs. Strategic Benefits Why undergo such a lengthy and complex effort? IT project governance delivers strategic business benefits in a range of areas. These benefits include: Transparency, Clarity, and Accountability Improved transparency of costs Improved clarity of process and priority Defined roles, responsibility and accountability Organizational trust and commitment Return on Investment and Stakeholder Value Improved understanding of overall cost drivers and ROI factors Visibility to risks, issues, and long term TCO Improved buy-in and support for stakeholder returns Consistency, Collaboration, and Communication Promotes a culture of partnership amongst stakeholders, project team members, and the organization as a whole. Facilitates collaboration across functional organizations, regions/locations, and individuals to leverage the best use of talent and perspective. Achieves a consistent and managed approach to taking calculated risks and resolving issues. Performance Improvement Identifies opportunity areas for improvement Drives aggressive and achievable performance targets and accountability metrics Process visibility, metrics, and ownership leads to best practice

ARCHITECTING GOVERNANCE

There are generally three overall end goals with respect to the architecture of governance:

• Business alignment & priority
• Risk management & mitigation
• Change management & enablement Ensuring that value is obtained from an investment is an essential component of governance. No investment should be undertaken without full knowledge of the expected long-term costs and the anticipated returns. Projects that move forward without a foundation of solid business case justification most often fail to meet expectations and are frought with delays and high cost overruns. Simply stating, "We have to do this" or "It's just the right thing to do" is not enough. Though these statements may be true, a small investment in the due-diligence of quantifying expectations, costs, and timeframes will pay big dividends in the long-term. Expected return should always include stated assumptions and be tied to risk management activities. Ensuring that the right projects are approved with a business case and objective priority promotes accurate forecasting of the TCO and sets appropriate ROI expectations, including identified direct and indirect benefits, and an ongoing review and evaluation of priorities. Finally, it is the identification of necessary skills and resources to successfully complete the projects which must also be balanced for workload and availability. Assessing necessary competencies and the readiness of individuals to move forward across the organization leads to sustainable change. Establishing proper tracking mechanisms are also essential to appropriately manage these aspects over time and ensure accountability is maintained.

KEY SUCCESS FACTORS

Figure 1 lays out a hypothetical governance structure for an IT portfolio of projects. This illustrates the cadence of various meetings and the key aspects to each layer of the governance structure.

Executive Steering Committee

Management Steering Team

IT Collaboration

Ongoing Business & Information Technology Team Interactions (Projects, Collaboration, Issue Resolution, Risk Management)

2 Weeks 1 Month 1 Quarter

IT Collaboration Management Steering Team Exectutive Steering Committee IT Portfolio Progress Global Strategic Decision Making Portfolio Prioritization & Commitments & Approvals Portfolio Approvals Resource Balancing & & Value Add Portfolio Alignment to Funding Requirements Business Objectives Resources Commitments Issue/Risk Assessments & Funding Service Levels & Resolutions & Performance Assessments

Figure 1:Hypothetical Governance Structure for an IT Portfolio

The following agenda provides context and insight to key topics in the governance meetings:

• Review top-level business transformation roadmap, timelines, budgets, priorities
• Review of each project within the transformation portfolio with a focus on: Status of the project scope, timeline, budget, progress: What must the governance body approve? Resource allocations & priorities: Is a realocation or rebalancing of resources necessary? Review of top priority issues, risks, and actions with resolution plans and progress: Assess confidence of success and determine necessary approvals. Confirmation of next steps and decision of readiness: Are expectations in line? Are deliverables thoroughly complete and with quality? Are all constituents ready to move forward? Ensuring that value is obtained from an investment is an essential component of governance. No investment should be undertaken without full knowledge of the expected long-term costs and the anticipated returns
• Organizational change management concerns: What actions must be taken to proceed with confidence?
• Business risk management & mitigation Topics: What internal (controllable) and external (non-controllable) factors are impacting business success? What must be done to mitigate the impacts of these risks?
• Review of continuous improvement initiatives and expectations: Are organizations seeking improvement opportunities and delivering results? Is the company culture embracing change? What actions must be taken to promote and sustain the desired results? Figure 2 explains the project governance review process and highlights the specific activities of each process step. Governance Process Example Construct for Sustainability and Improvement Reviews begin with a brief dashboard review of progress toward achieving Review the business objectives. Dashboards The dashboard metrics reveal process control status and confidence Invoke levels to maintain expected operational performance levels and achieve Action? Control Plan the business objectives. Active projects are confirmed and assessed per the expected deliverables Project within their milestone progress. Review Approval to proceed continues the process or places the project on hold Continue Proceed? for new projects to be prioritized. Progress New projects are submittedfollowing a vetting be supervision to Project ensure clarity according to the success criteria and alignment to the Requests business objectives. Submitted projects are reviewed, prioritzed accordingly, and appropriately Project Action? allocated team/resources. Requests Figure 2: Project Governance Review Process

THE BOTTOM LINE

Most IT projects have the goal of driving business process improvements. When the techniques of IT governance are the priority, the organization will be positioned to achieve the business improvement goals and expectations.

We employ the philosophy of business process improvement in our engagements and use the discipline of IT governance to help our clients achieve business results. IT project governance helps organizations ensure the effective and efficient use of IT in enabling the organization to achieve its goals. In closing, there are five key strategies for IT governance success:

• Governance is the overarching element for project success, including ERP implementation. It is not to be minimized or treated as a task within a project plan, instead it sits on top and oversees the portfolio of all projects in the organizational domain.
• Obtain management buy-in and ownership at all appropriate levels to ensure top priority and alignment of initiatives and projects.
• Recognize that most initiatives require change throughout the organization. Time and attention must be allocated to bring people along and confirm their understanding, adoption, and commitment for success.
• Ensure stakeholders and leaders are aligned, enabled, andmotivated to support and lead the necessary change efforts.
• Promote internal marketing activities to effectively communicat regularly through multiple media channels. Be creative with email, presentations, video, meetings, posters/flyers, and one-on-one discussions to generate positive anticipation, early adoption, and sustainable results.