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Program Governance Dr. Muhammad Ehsan Khan Best Practices and Advances in Program Management Series Program Governance Best Practices and Advances in Program Management Series Series Editor Ginger Levin RECENTLY PUBLISHED TITLES Project Management for Research and Development: Guiding Innovation for Positive R&D Outcomes Lory Mitchell Wingate The Influential Project Manager: Winning Over Team Members and Stakeholders Alfonso Bucero Project Management for Research and Development: Guiding Innovation for Positive R&D Outcomes Lory Mitchell Wingate PfMP® Exam Practice Tests and Study Guide Ginger Levin Program Management Leadership: Creating Successful Team Dynamics Mark C. Bojeun Successful Program Management: Complexity Theory, Communication, and Leadership Wanda Curlee and Robert Lee Gordon From Projects to Programs: A Project Manager’s Journey Samir Penkar Sustainable Program Management Gregory T. Haugan Leading Virtual Project Teams: Adapting Leadership Theories and Communications Techniques to 21st Century Organizations Margaret R. Lee Applying Guiding Principles of Effective Program Delivery Kerry R. Wills Construction Program Management Joseph Delaney Implementing Program Management: Templates and Forms Aligned with the Standard for Program Management, Third Edition (2013) and Other Best Practices Ginger Levin and Allen R. Green Program Governance Muhammad Ehsan Khan CRC Press Taylor & Francis Group 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487-2742 © 2015 by Taylor & Francis Group, LLC CRC Press is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S. Government works Version Date: 20140625 International Standard Book Number-13: 978-1-4665-6891-4 (eBook - PDF) This book contains information obtained from authentic and highly regarded sources. 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For permission to photocopy or use material electronically from this work, please access www.copyright. com (http://www.copyright.com/) or contact the Copyright Clearance Center, Inc. (CCC), 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400. CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the CRC Press Web site at http://www.crcpress.com This book is dedicated to my grandfather, Muhammad Yahya Khan, who was a professional educator for more than 50 years. Throughout his life, he guided and taught professionals who are now contributing to the development of nations. I pray for his departed soul! Contents Prologue............................................................................................... xiii Acknowledgments................................................................................. xv Author..................................................................................................xvii Section I  Foundation of Governance Chapter 1 Governance.......................................................................... 3 Defining Governance...................................................................4 Governance at Multiple Levels...................................................5 Summary.......................................................................................6 References......................................................................................7 Chapter 2 Transaction Cost Economics.............................................. 9 Transactions—Core Elements and Attributes.......................11 Behavioral Assumptions.......................................................12 Governance Structure Attributes........................................12 Hazards of Concern...................................................................13 Incomplete Contracting........................................................13 Bilateral Dependency and Fundamental Transformation......................................................................14 Adaptation or Maladaptation..............................................14 Linking Governance, Governance Structures, and Contracts.....................................................................................15 The Impact of Asset Specificity and Behavioral Assumptions on Contracts........................................................17 Application to Projects and Programs....................................18 Summary.................................................................................... 20 References....................................................................................22 Chapter 3 Agency Theory.................................................................. 23 Agency Problems and Agency Loss.........................................25 Agency Costs and Contracts.....................................................27 vii viii • Contents Application and Support...........................................................29 Criticism..................................................................................... 34 Complementary Theories..........................................................36 Stewardship Theory...............................................................36 Resource Dependency Theory.............................................37 Summary.....................................................................................38 References....................................................................................39 Chapter 4 Corporate Governance...................................................... 41 Why Corporate Governance?...................................................41 Defining Corporate Governance............................................. 42 Factors Affecting Corporate Governance and Its Evolution..................................................................................... 44 Corporate Governance Institutions........................................ 46 The Board of Directors......................................................... 46 Auditors and Their Independence.......................................47 Functions of Corporate Governance...................................... 48 Reporting and Disclosure.................................................... 48 Resource Management......................................................... 48 Risk Management..................................................................49 Performance Management...................................................49 Relationship Management....................................................49 Strategic Oversight................................................................49 Compliance.............................................................................50 The Human Side of Corporate Governance...........................50 Ethics and Ethical Compliance...........................................50 Rationality and Behavioral Aspects....................................52 Design and Implementation Considerations..........................53 Summary.....................................................................................55 References....................................................................................57 Section II Programs Chapter 5 Temporary Organizations................................................ 61 What Are Temporary Organizations?.....................................61 Projects and Programs as Temporary Organizations.......... 64 Contents • ix Summary.....................................................................................65 References................................................................................... 66 Chapter 6 Programs............................................................................ 69 Defining Programs.....................................................................69 Program Characteristics...........................................................71 Benefits Delivery....................................................................71 Strategic Focus.......................................................................72 Intended Temporariness.......................................................73 The Need for Integration......................................................73 Uncertainty at the Core........................................................73 Delivering Change.................................................................74 Adaptability to Change.........................................................74 Program Categorization............................................................74 Program Management...............................................................78 Program Life Cycle.................................................................... 80 Formation...............................................................................81 Organization..........................................................................82 Benefits Delivery....................................................................82 Closure....................................................................................83 External Context of the Program.............................................83 Organizational Fit..................................................................85 Program Flexibility...............................................................85 Organizational Stability....................................................... 86 Resource Availability........................................................... 86 Summary.................................................................................... 86 References................................................................................... 88 Section III  Program Governance Chapter 7 Program Governance........................................................ 93 Defining Program Governance................................................93 Why Should Programs Be Governed?.....................................95 Program Governance Perspectives..........................................97 Summary.................................................................................. 100 References..................................................................................101 x • Contents Chapter 8 Program Governance Domains...................................... 103 Program Structure and Processes..........................................104 Program Resources..................................................................104 Program Strategy......................................................................105 Program Decisions...................................................................105 Escalated Risks and Issues......................................................106 Program Progress.....................................................................107 Program Benefits......................................................................108 Program Stakeholders..............................................................109 Summary...................................................................................110 References..................................................................................111 Chapter 9 Program Governance Functions.................................... 113 Benefits Definition....................................................................113 Governance and Management Framework..........................114 Organizing and Structuring..............................................114 Process and Mechanism.....................................................116 Ensuring Strategic Alignment................................................117 Directing Benefits Delivery.....................................................117 Interfacing and Coordination.................................................118 Reviewing Progress..................................................................119 Providing Governance Oversight......................................... 120 Support and Guidance....................................................... 120 Monitoring and Control.....................................................121 Reporting and Communicating............................................ 123 Authorization and Approvals.................................................125 Summary.................................................................................. 126 References................................................................................. 128 Chapter 10 Program Governance Institutions and Roles................ 131 The Board of Directors............................................................132 Portfolio Management.............................................................133 Executive Sponsors.................................................................. 134 The Program Governance Board...........................................137 The Program Management Office..........................................139 Advisory Panels........................................................................141 Audit Committees....................................................................142 Contents • xi Generic Roles—The Broker and Steward..............................143 Summary...................................................................................145 References..................................................................................146 Chapter 11 Program Governance Mechanisms................................ 149 Strategic Reviews......................................................................150 Stage Gate Reviews...................................................................151 Periodic Health Checks.......................................................... 154 On-Demand Consultation and Reviews...............................155 Program Audits........................................................................155 Planned and On-Demand Reporting....................................157 Quality Review.........................................................................158 Advisory Sessions.....................................................................159 Summary...................................................................................160 References..................................................................................162 Chapter 12 Factors Affecting Program Governance........................ 163 Organizational Factors............................................................164 Corporate Governance.......................................................164 Organizational Governance Paradigm.............................165 External Factors........................................................................167 Cultural Influences..............................................................167 Legislation, Regulations, and Standards..........................167 Program Attributes..................................................................168 Benefits Delivery Mechanisms...........................................168 Program Structure...............................................................169 Program Uncertainty and Complexity.............................170 Program Life Cycle Stage....................................................171 Program Strategic Value.....................................................172 Program Performance.........................................................173 Differences in Governance Regimes—Some Research.......173 Summary...................................................................................175 References..................................................................................176 Chapter 13 Contingent Governance Framework for Programs (CGFPrg™)........................................................................ 179 Contingency Theory.................................................................180 xii • Contents Aligning Agility and Discipline: Contingent Governance Framework for Programs..................................181 Influential Factors................................................................182 Governance Framework Elements....................................182 Guidelines to Implement a Contingent Governance Framework for Programs........................................................183 Summary...................................................................................186 References..................................................................................187 Appendix: Glossary of Acronyms...................................................... 189 Prologue Organizations form programs to achieve strategic objectives that help them grow and perform more effectively and efficiently. The importance of these initiatives is such that an oversight function is required from executive management, whose role is to monitor the program ensuring that all parts are on track, support the program when required, and control different aspects of the program if things seem to go in the wrong direction. These dimensions of unification form the core of program governance. The need for program governance comes from the fact that there are certain aspects of a program that are not under the direct control of the program manager, and he or she requires support from the program governors to ascertain successful delivery of the program objectives. In addition, the program governors have to ensure that the program activities are being carried out as planned, and that any major deviations are accounted for and approved. In the following chapters, for the sake of clarity, all governance entities or roles (such as steering committees, program boards, program sponsors, etc.) will be grouped together and referred to as program governors. A few years ago, I was working with a team of software professionals to develop the first trading platform in the Gulf Cooperation Countries (GCC) region. The team, I still remember, could be called a star team. We were a start-up; we needed a team like that one. It was similar to a “band of brothers” working together to build their dream rather than a pool of professionals working toward an objective. We succeeded! We created our dream. What happened after that is a memory to cherish. However, one of the key conclusions that we were able to get from the experience was the adaptability of the environment in which we worked. We called it ordered chaos. We knew we had to change as the context changed. What was important to us at one stage became insignificant at the later stage, so we changed ourselves. As the goals became clear, we shifted our approach. We continued to adapt until we reached our destiny. Since then I have been a strong supporter of using adaptable frameworks to manage teams and work. This book concentrates on presenting a program governance framework that is adaptable to the context of the program. xiii xiv • Prologue Section I focuses on establishing an understanding of governance. The chapters in this section discuss the concept of governance from different perspectives. This section will be useful for both practitioners and academics who want to understand the core of governance based on its underlying theories. While reading this section, you will see a number of references to research that has been carried out in the domain of governance. In addition, there is a detailed chapter on corporate governance, which has a strong influence on governance frameworks for projects and programs. Section II defines programs and related concepts. A detailed discussion of temporary organizations is described in this section. The concept of the temporary organization is fundamental to understanding the concept of projects and programs. Such organizations are formed to meet certain organizational objectives for a limited period of time and cease to exist based on predefined conditions such as objective accomplishments. Section III focuses on program governance and related ideas. This is where the complete framework of program governance is proposed from different dimensions. It proposes a new framework for the governance of programs based on changing context. This section also proposes guidelines for designing and implementing governance frameworks based on the proposed model. Acknowledgments Blessings from the Almighty Allah have been instrumental in my career and life. I would like to thank my parents whose prayers and encouragement have always been a source of energy for me to progress in my life and to overcome obstacles that otherwise seemed impossible to surmount. Many thanks and gratitude to my mentors and guides, Dr. Ginger Levin, Dr. Rodney Turner, Dr. Ralf Müller, and John Wyzalek, who have played a vital role in developing my authoring capabilities. Without their support and guidance I would still be a practitioner with ideas, yet unable to translate them into a framework. I would also like to thank my brother-in-law Muhammad Jamal Maqsood, CISA, ITIL, for his consistent feedback. He read each and every chapter of this book and helped me to improve the overall quality of the content and context. I would like to thank my grandparents, in-laws, brothers, sisters, elders, and friends, especially Dr. Abdul Waheed, Mohamed, and Saeed, who prayed for me, and who have consistently motivated and encouraged me during this journey. Finally, a special thanks to my wife (Rafia) and children (Ayaan and Eshaal Maryam) for their patience, love, and encouragement. They are my source of motivation, and without their consistent support, the idea of writing the first book on program governance would still be a dream. xv Author Dr. Muhammad Ehsan Khan, Ph.D., is an entrepreneur and an internationally acknowledged professional on the subject of governance and management of strategic initiatives. An award-winning strategist with over a decade of leadership success, Dr. Khan is a founding member and presently serves as a partner and Vice President of Operations and Service Delivery for a UAE-based firm, Inseyab Consulting & Information Solutions LLC. Dr. Khan did his Ph.D. in strategic, program, and project management (Major de Promotion/Valedictorian) at SKEMA Business School, France, and is a certified Program (PgMP) and Project Management Professional (PMP). He is also the recipient of the 2012 PMI James R. Snyder Award and was awarded the Young Researcher of the Year award by IPMA in 2013. Dr. Khan is the designer/originator of Contingent Governance Framework for Projects (CGFP) and Contingent Governance Framework for Programs (CGFPrg). In his current capacity at Inseyab Consulting & Information Solutions, a business intelligence (BI) company, he has collaborated with BI experts to design a BI Framework for Project Portfolios (BIPPf). An initial version of this framework was presented and well received at the PMI Global Congress 2014, EMEA. In order to support other researchers and research publications, Dr. Khan works as a reviewer for the International Journal of Project Management (IJPM) and was awarded with a Certificate of Reviewer Excellence for his contributions. With a special inclination toward strategic planning and governance of projects and programs, Dr. Khan has provided management, consulting, and mentoring services in the Middle East region. He has been involved in the establishment of PMOs, implementation of management/governance frameworks, and related practices and tools, in order to create an environment of project management excellence. He has also manages medium- to large-scale ICT programs and projects for various customers, especially in the government sector. xvii