Rethinking Change

The fifth and final paper in Dr. Lynda Bourne’s series: Project Management in the time of COVID has been published in the November edition of PM World Journal.  This paper outlines some practical ways to facilitate the changes proposed in the previous four papers in this series, and identifies some processes and actions that can be applied by organizations to assist with the transition to life post-COVID.

It is organized as follows:

• First, a discussion of the importance of leadership, engagement of stakeholders, managing uncertainty, consultation, and communication, in facilitating change
• Second a discussion on approaches for effective change management
• Third a focus on how to identify and counteract recurring issues in implementing the change.

The full series can be downloaded from https://mosaicprojects.com.au/PMKI-ORG-060.php#COVID

Rethinking Leadership and Governance

Rethinking Leadership and Governance is the second paper in the series Project Management in the time of COVID. Governance and leadership are mutually inclusive. Leaders define and support good governance, while leadership is enhanced by good governance.

This paper looks at the definitions of governance and leadership, then describes Australia’s pre-pandemic environment in terms of those definitions, followed by an overview of our first two years of lockdowns. The final section discusses how reviews and reforms of governance and leadership practices may be applied to develop the new normal needed to counteract the problems of the past.

Download the paper from:  https://mosaicprojects.com.au/PMKI-ORG-060.php#COVID

PM World Journal is a free monthly project management journal, see more at: https://pmworldjournal.com/

Stakeholder Circle Upgrade Launched

The Stakeholder Circle® is the premier methodology and tool set for analyzing the stakeholder community around a business activity, or a project. The primary tool for implementing the Stakeholder Circle® methodology, is the Stakeholder Work Sheet (SWS). The latest upgrade now includes:

1. The Stakeholder Circle® report as an integrated, fully automatic, capability
2. Greater control over the prioritization calculations, you can balance power, proximity, and urgency to suit your environment
3. Enhanced engagement assessment
4. The stakeholder engagement index to track changes in the average stakeholder attitudes over time
5. An integrated on-line help capability linked from each tab of the spreadsheet

Two version of the tool, a 100-stakeholder version and a 1000-stakeholder version.

You are invited to download the enhanced sample version of the spreadsheet from https://mosaicprojects.com.au/shop-stakeholder-worksheet.php  (there is no longer a requirement to register before downloading). The sample version allows the first 5 stakeholders to be edited and all of the macros to run.

For more information see: https://mosaicprojects.com.au/PMKI-SHM-030.php

Effective Stakeholder Engagement is Multifaceted

An organisation’s success, reputation and long term sustainability depends on its stakeholders and how they perceive the organisation.  The way the organisation interacts (or is perceived to interact) with its stakeholders builds its reputation and its customer base.  But customers belong to communities and it’s the broader community that grants the ‘social licence’ needed for the organisation to operate long-term. And, because no one and nothing is ever perfect, things will go wrong from time to time requiring action to protect the organisation’s reputation and its social licence.

The objective of this post is to:

• Put all (or most) of the different mechanisms used by organisations to engage with stakeholders into perspective; and
• Emphasise the message that authentic and effective stakeholder/community engagement needs an organisation-wide coordinated approach that is governed from the very top levels of management.

The Stakeholder Engagement Spectrum

The Organisational Core

The characteristics of the organisation are always at the centre of every stakeholder relationship[1]. The way your organisation is structured, its ethics, characteristics, systems, and services, underpin how its stakeholder community will ultimately perceive the business. The key to successful stakeholder engagement is in part the way the organisation is structured and operated, and in part being authentic and realistic in the way various aspects of stakeholder communication and engagement are used. If your business is a low-cost, low service, bulk supplier don’t pretend to be an upmarket high service organisation. Many people are more than happy to shop at retail outlets such as Walmart and Aldi, attracted by price and simplicity; others prefer the higher levels of service and higher prices from more upmarket department stores. The art of stakeholder engagement is to maximise the appeal and perceptions of the organisation as it is – not to mask reality with a pretence of being something else.

However, poorly governed unethical organisations will always ultimately fail regardless of their stakeholder engagement effort; you can’t build an effective long-term relationship on unsound foundations.

 

The 8 Aspects of the Stakeholder Engagement Spectrum

The eight aspects of stakeholder engagement highlighted above are all well defined in various publications; the way they are used in this post is briefly set out below:

PR: Public Relations – The actions taken by an organisation to develop and maintain a favourable public image. PR is a strategic communication process that builds mutually beneficial relationships between the organisation and its stakeholders. The core element of PR is push communication; it is a proactive process controlled by the organisation, broadcasting information to a wide community to influence attitudes.

Advertising – The activity production and placing of advertisements for products or services. The purpose of each advertisement is to announce or praise a product (goods, service, concept, etc.) in some public medium of communication in order to induce people to buy, use it, or take some other action desired by the advertiser. The difference between PR and Advertising is that PR largely focuses on creating or influencing attitudes and perceptions whereas advertising focuses on some form of ‘call to action’.

CRM: Customer Relationship Management – Refers to the practices, strategies, and technologies that organisations use to manage and analyse customer interactions and customer data throughout the customer lifecycle. The goal of CSR is to improve the organisation’s relationship with each customer, assisting in customer retention, and driving sales growth. Good CRM systems make it easy for people to do business with you.

Issues Management[2] – The process of identifying and resolving issues. Effective issues management needs a pre-planned process for dealing with unexpected occurrences that will negatively impact the organisation if they are not resolved. The scope of this concept ranges from ‘crisis management’ where the magnitude of the issue could destroy the organisation (and the most senior management take an active role) through to empowering staff to deal with relatively minor customer complaints. The key to effective issue management is resolving the issue to the satisfaction of the affected stakeholders. This requires effective systems and preplanning – you don’t know what the next issue will be, but you can be sure there will be one.

Stakeholder Management Initiatives[3] – this is the area where most of my work is focused; managing the expectations of, and relationships with, the stakeholder community surrounding an organisational activity, initiative, or project. Most business initiatives and projects have a high potential to affect a range of stakeholders both positively and negatively (and frequently both at different times). How these relationships are managed affects not only the ability of the organisation to deliver its initiative or project successfully, but also the overall perception of the organisation in the minds of the wider stakeholder community.

Business Intelligence & Environment Scanning – BI and other forms of environmental scanning looking at attitudes, trends, behaviours, and other factors in the wider stakeholder community. They are a key emerging element in the overall approach to stakeholder engagement used by proactive organisations. This is very much the space of ‘big data’ and data mining. Much of the collection of data can be automated and ‘hidden’ from view. The challenge is making sure the information collected is legal (privacy legislation is an important consideration), accurate, relevant, and complete; then asking the ‘right questions’ using various data mining tools. As with any intelligence gathering process, obtaining the data is the easy part of the equation; the real skill lies in developing, validating and interpreting the data to create information that can be used to produce valuable insights.

Social Networks – The ubiquitous, widespread, and diverse nature of social networks ranging from Facebook to personal interaction down the pub can easily outweigh all of the organisation’s efforts to create a positive image using PR, advertising and the other ‘controlled’ functions discussed above.  The organisation’s staff and its immediate stakeholders literally have millions of connections and interconnections to other stakeholders. Most of these connections are unseen, and the environment cannot be controlled. The best any organisation can hope to achieve in this relatively new communication environment is to plant seeds and seek to have some influence. Seeding ideas and concepts into the ‘Twittersphere’ may result in a concept being taken up and ‘going viral’, more commonly the seed simply fails to germinate. Conversely identifying negative trends and issues early, particularly if they are false, is critically important and where possible these negative influences should be countered but given the nature of the environment this is a very difficult feat to achieve.  Smart organisations recognise that their staff, customers, contractors, and suppliers all engage in this space and through other effective communication channels can influence how these people respond to opportunities and issues affecting the organisation.

CSR: Corporate Social Responsibility[4] – CSR completes the circle and brings it back towards the concept of PR.  CSR contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders. ISO 26000  Guidance Standard on Social Responsibility, defines social responsibility (ie, CSR) as follows:

Social responsibility is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that:
–  Contributes to sustainable development, including the health and the welfare of society
–  Takes into account the expectations of stakeholders
–  Is in compliance with applicable law and consistent with international norms of behaviour, and
–  Is integrated throughout the organization and practised in its relationships.

The key difference between CSR and PR is that CSR actually involves doing things both within the organisation and within the wider community, whereas PR focuses on telling people things.

 

Applying the Stakeholder Engagement Spectrum

The various aspects of stakeholder engagement spectrum combined together to create the organisation’s reputation, engage communities, build customers, and when necessary protect the organisation’s reputation. The key combinations are set out below:

Reputation Creation: The key components needed to create and maintain a desirable reputation start with CSR and work clockwise through the spectrum to CRM.

Community Engagement: The key components needed to effectively engage the wider community are focused on CSR but includes the elements moving anti-clockwise from CSR through to Issues Management.

Building Customers: The elements needed to build and retain customers start with PR and work clockwise through the spectrum to Issues Management.

Protecting Your Reputation: Finally protecting the organisation’s reputation is focused around Issues Management, but includes elements of CRM and continues clockwise through to Environment Scanning. In addition, many of the ‘push’ elements in the spectrum may be used as tools to help manage issues and protect the reputation of the organisation including PR and advertising.

 

Conclusion

The ‘stakeholder engagement spectrum’ above is deliberately drawn in a circle surrounding the organisational core, because all of the different aspects interrelate, many overlap, and they all build on each other.  The governance challenge facing many organisations is breaking down the traditional barriers between functional areas such as advertising, PR and CRM/sales, so that the entire organisation’s approach to its stakeholders is coordinated, authentic and effective.

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[1] See more on Ed Freeman’ stakeholder theory at: https://mosaicprojects.wordpress.com/2014/07/11/understanding-stakeholder-theory/

[2] For more on issues management see: https://mosaicprojects.com.au/WhitePapers/WP1089_Issues_Management.pdf

[3] For more on stakeholder management see: https://mosaicprojects.com.au/Stakeholder_Circle.html

[4] For more on CSR see: https://mosaicprojects.wordpress.com/tag/corporate-social-responsibility/

Levels of Stakeholder Engagement

How engaged should your stakeholders be? Or how engaged do you want them to be? In an ideal world the answer to both questions should be the same, but to even deliver a meaningful answer to these questions needs a frame of measurement.  This post uses ideas from 1969 to propose this framework!

In July 1969, Sherry R. Arnstein published ‘A Ladder of Citizen Participation’ in the A.I.P Journal[1] looking at citizen participation and the consequential citizen power over a range of USA government initiatives designed to enhance the lives of disadvantaged people in US cities. The typology of participation proposed by Arnstein can be transposed to the modern era to offer a framework for discussing how engaged in your project, or program, your stakeholders should be in actively contributing to the management and governance of the work they are supposed to benefit from.

Modern paradigms such as ‘the wisdom of crowds’, ‘user participation in Agile teams’ and ‘stakeholder theory’ all lean strongly towards stakeholder ownership of the initiative designed to benefit them. These views are contrasted by concepts such as technical competence, intellectual property rights, confidentiality and the ‘iron triangle’ of commercial reality (often backed up by contractual constraints).

The debate about how much control your stakeholders should have over the work, and how engaged they should be in the work, is for another place and time – there is probably no ‘universally correct’ answer to these questions. But it is difficult to even start discussing these questions if you don’t have a meaningful measure to compare options against.

Arnstein’s paper is founded on the proposition that meaningful ‘citizen participation’ is ‘citizen power’ but also recognises there is a critical difference between going through empty rituals of participation and having real power to affect the outcome of a process. This poster was from the May 1968 student uprising in Paris, for those of us who can’t remember French verbs, translated it says:  I participate; you participate; he participates; we participate; you (plural) participate; …… they profit.   The difference between citizen participation in matters of community improvement and stakeholder participation in a project is that whilst civil participation probably should mean civil control,  this same clear delineation does not apply  to stakeholder engagement in projects.  The decision to involve stakeholders in a project or program is very much open to interpretation as to the best level of involvement or engagement.  However, the ladder of engagement proposed by Arnstein can easily be adapted to the requirement of providing a framework to use when discussing what is an appropriate degree of involvement for stakeholders in your project or program.

There are eight rungs in Arnstein’s ladder; starting from the bottom:

1. Manipulation: stakeholders are placed on rubberstamp advisory committees or invited to participate in surveys, provide feedback, or are given other activities to perform which create an illusion of engagement but nobody takes very much notice of the information provided.   The purpose of this type of engagement is primarily focused on making the stakeholders feel engaged rather than using the engagement to influence decisions and outcomes. The benefits can be reduced stakeholder opposition, at least in the short-term, but there is very little real value created to enhance the overall outcomes of the project.
2. Therapy: this level of stakeholder engagement involves engaging stakeholders in extensive activities related to the project but with a view to changing the stakeholder’s view of the work whilst minimising their actual ability to create change. Helping the stakeholders adjust to the values of the project may not be the best solution in the longer term but every organisational change management guideline (including our White Paper) advocates this type of engagement to sell the benefits the project or program has been created to deliver.
3. Informing: informing stakeholders of their rights, responsibilities, and/or options, can be the first step towards effective stakeholder participation in the project and its outcomes. However too frequently the emphasis is placed on a one-way flow of information from the project to the stakeholders. Particularly when this information is provided at a late stage, stakeholders have little opportunity to contribute to the project that is supposed to be delivering benefits for them. Distributing information is a key stakeholder engagement activity (see the Three Types of Stakeholder Communication) but there have to be mechanisms for effective feedback for this process to maximise its potential value.
4. Consultation: inviting stakeholder’s opinions, like informing them, can be a legitimate step towards their full participation. But if the consultation is not combined with other modes of participation this rung of the ladder is still a sham, it offers no assurance that the stakeholder concerns and ideas will be taken into account. Effective participation includes providing stakeholders with a degree of control over the consultation processes as well as full insight as to how their inputs are considered and used. In the long run window dressing participation helps no one.
5. Placation: at this level stakeholders have some degree of influence although tokenism is still potentially involved. Simply including stakeholders in processes such as focus groups or oversight committees where they do not have power, or are trained not to exercise power, gives the appearance of stakeholder engagement without any of the benefits.
6. Partnership: at this level power is genuinely redistributed and the stakeholders work with the project team to achieve an outcome that is beneficial to all. Power-sharing may seem risky all but if the right stakeholders with a genuine interest in the outcome are encouraged to work with the technical delivery team to constructively enhance the project’s outcomes (which is implicit in a partnership) everyone potentially benefits.
7. Delegated power: In many aspects of projects and programs, particularly those associated with implementation, rollout, and/or organisational change, delegating management authority to key stakeholder groups has the potential to significantly improve outcomes. These groups do need support, training, and governance, but concepts such as self-managed work teams demonstrate the value of the model.
8. Stakeholder control: In one respect stakeholders do control projects and programs but this group tends to be a small management elite fulfilling roles such as sponsors, steering committees, etc. Genuine stakeholder control expands this narrow group to include many more affected stakeholders. Particularly social projects, where the purpose of the project is to benefit stakeholders, can demonstratively be improved by involving the people project disposed to help. But even technical projects can benefit from the wisdom of crowds[2].

In summary, the framework looks like this:

The biggest difference between the scenario discussed in the original paper and stakeholder engagement around projects and programs is the fact that different stakeholders very often need quite different engagement approaches to optimise project outcomes. Arnstein’s 1969 paper argued in favour of citizen participation as a single entity and the benefits progressing up the ladder towards its control. In a project situation it is probably more sensible to look at different groups of stakeholders and then assess where on the ladder you would like to see that group functioning. Some groups may only need relatively low levels of information to be adequately managed. Others may well contribute best in positions of control or at least where their advice is actively sought and used.

Do you think this framework is helpful in advancing conversations around stakeholder engagement in your project?

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[1] Arnstein, S.R.  AIP Journal July 1969 pp:216 – 223.  A Ladder of Citizen Participation.

[2] The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, published in 2004, is a book written by James Surowiecki about the aggregation of information in groups, resulting in decisions that, he argues, are often better than could have been made by any single member of the group.

Defining Project Success using Project Success Criteria

Everyone likes a successful project but the big question is what makes a project successful??  A good example is the Sydney Opera House; was the Sydney Opera House successful or not?

The project ran significantly over budget finished very late and was technically less than perfect; $millions are currently being spent rectifying many of the technical deficiencies in the building. But can anyone say Sydney Opera House is not one of the most recognised and therefore successful buildings in the world?[1]

Success is an ephemeral concept! Different people will have different perspectives and judge the success or failure project differently. Neither a project nor a program manager can control many of the factors that have made the Sydney Opera House worldwide icon but they can address the concept of success with their stakeholders and then work to deliver a successful outcome based on these discussions.

So what is success? There are probably three key elements, but these frequently create a paradox that requires a balanced approach to success. The three fundamental elements are:

• The Iron Triangle (Scope + Cost + Time)
• Benefits realised (or maximised)
• Satisfied stakeholders (but, when??)

One of the key paradox is a myopic focus on the Iron Triangle particularly time and cost can frequently destroy benefits and leave the stakeholders unhappy, but focusing on keeping stakeholders happy can frequently have detrimental effects on the Iron Triangle. There are no easy solutions to this problem[2].

In my view, the successful delivery of a project or program requires:

• Achieving the overall goal for the project;
• Delivering its objectives; and
• Meeting its success criteria.

But, to achieve success you need to define and agree the project goal, the project objectives, and the project success criteria with your key stakeholders with a view to achieving a combination of stakeholder satisfaction and value created. The goal and objectives frame the project’s work and direction. The success criteria frame how the objectives are achieved.

 

The Project Goal

Goals are high-level statements that provide the overall context defining what the project is trying to achieve. One project should have one goal (if there are multiple goals you are most likely looking at a program of work[3])!  For example:  Within 180 days, reduce the pollution in the rainwater runoff from a council tip by 98%.

The goal is a key statement in the Project Charter[4] and if the project is to be successful, all key stakeholders need to agree the goal.  The goal needs to be specific and should define the project in a way that focuses attention on the key outcomes required for overall success from a technical and strategic business perspective[5].

 

Project Objectives

The objectives are lower level statements that describe the specific, tangible products and deliverables that the project will create; each objective (and the overall goal) should be SMART[6]. For the runoff project the objectives may include:

• Develop wetlands to trap 99.8% of sediment
• Install channels to collect and direct the runoff
• Install screens remove floating debris
• Etc….. There will be a number of objectives……

Each objective requires defining and specifying with clear performance criteria so you know when it has been achieved. This may be done by the client or by the project team during the scope definition process. The performance criteria may be defined by a set of precise specifications that are specific and measurable or may be defined as a performance requirement with either:

• The external contractor to provide the specific details of how the objective will be achieved, or
• The internal project team to develop the details in consultation with the client

The defined objectives are the building blocks that facilitate the achievement of the goal and the creation of the benefits the organisation is expecting from the project[7]. The benefits need to be realised to create value.

 

Success criteria

Success criteria are different they measure what’s important to your stakeholders. Consequently, they are the standards by which the project will be judged at the end to decide whether or not it has been successful in the eyes of its stakeholders. As far as possible the stakeholders need to be satisfied; this includes having their expectations fulfilled and in general terms being pleased with both the journey and the outcome (in this respect scope, cost and/or time may be important).

Success criteria can be expressed in many different ways some examples include:

• Zero accidents / no environmental issues;
• No ‘bad press’ / good publicity received;
• Finalist in the project achievement awards;
• Plus the goal and all of the objectives achieved (yes – you still need to do the work).

For any project, the success criteria should be split between project management success criteria which of related to the professional aspects of running the project; plus project deliverable success criteria which are related to the performance and function of the deliverable.

Documenting the success criteria is important, it means you can get project stakeholders to sign up to them, and having them clearly recorded removes ambiguity about what you are setting out to do. The four basic steps to create useful success criteria are

1. Document and agree the criteria; each criteria should include:
   1. The name of success criteria,
   2. How it is going to be measured,
   3. How often it is going to be measured, and
   4. Who is responsible for the measurement.
2. Use continuous measurements where possible. For example, rather than ‘finish the project on time’ measure progress continually ‘no activity completes more than 5 days after its late finish date’.
3. Baseline today’s performance.
4. Track and report on your progress.

As with any performance indicators, the art is to select a few key measures that represent the wider picture if there are too many success criteria defined the impact will be severely reduced. For example, the effectiveness of meetings, communication, and stakeholder attitude could be measured scientifically using the ‘Index Value’ in the Stakeholder Circle[8] or pragmatically by measuring the number of open issues against a target (eg, no more than 5 high priority open issues).

 

Summary

Goals and objectives are the building blocks required to allow the realisation value from the project’s outputs; they are essential ingredients in a successful project but are insufficient on their own.  The role of success criteria is to direct the way work at the project is accomplished so as to meet stakeholder expectations, and to craft a perception of success in the stakeholder’s minds.

Project success is an amalgam of value created for the organisation and your stakeholders being satisfied with the journey and the outcome.  This concept of success may seem subjective, but it does not have to be. Successful organisations work to take the guesswork out of this process by defining what success looks like and agreeing these definitions with the key stakeholders, so they all know when the project has achieved it.

This means the key to stakeholders perceiving your project as successful lays in understanding the criteria they will measure success by, incorporating those measures into your project success criteria, and then working to achieve the criteria. But even this is not enough, to engage your stakeholders you need to communicate the criteria, communicate your progress and communicate your success at the end. For more on effective communication see: http://www.mosaicprojects.com.au/PM-Knowledge_Index.html#PPM07

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[1] For more on the success or failure of the Sydney Opera House see Avoiding the Successful Failure!:  http://www.mosaicprojects.com.au/Resources_Papers_046.html

[2] For more on paradox see: https://www.projectmanagement.com/blog-post/30669/The-Problem-With-Paradox

[3] For more on differentiating projects and programs see: http://www.mosaicprojects.com.au/WhitePapers/WP1002_Programs.pdf

[4] For more on the project charter see: http://www.mosaicprojects.com.au/WhitePapers/WP1019_Charter.pdf

[5] For more on project success see: http://www.mosaicprojects.com.au/Mag_Articles/N001_Achieving_Real_Project_Success.pdf

[6] SMART = Specific, Measurable, Attainable, Relevant and Time-framed.

[7] For more on linking objectives and benefits see: http://www.mosaicprojects.com.au/WhitePapers/WP1042_Outputs_Outcomes_Benefits.pdf

[8] The Stakeholder Circle® index value see: http://202.146.213.160/help-files/stakeholder-engagement-profile/#engagement-index

Governmentality -the cultural underpinning of governance

Two major governance failures in recent times highlight the importance of organisational culture in delivering a well-governed entity.  Professor Ralf Müller has adapted the term ‘governmentality’ to describe the systems of governance and the willingness of the people within an organisation to support the governance objectives of the organisation’s governing body. When the willingness to be governed breaks down, as these two examples demonstrate, governance failures follow.

Toyota

The Lexus ‘unintended acceleration problem’ from 2009 has cost  car manufacturer Toyota a staggering $1.2 billion fine to avoid prosecution for covering up severe safety problems and continuing to make cars with parts the FBI said Toyota “knew were deadly.”  In addition to numerous civil actions and costs of reputational damage.  The saga was described as a classic case of corporate culture that favoured the seemingly easy way out instead of paying the cost and doing the right thing.  But, the actions of the people who magnified the problem by attempting to cover up the issues fundamentally contradicts the ‘Toyota Way’ that has guided Toyota since 2001. The Toyota Way has two core principles, respect for people and continuous improvement (kaizen).

Respect for people puts ‘people before profits’, and this is not an idle slogan.  Following an Australian Government decision in 2014, all motor vehicle manufacturing in Australia will cease by 2018 (this affects General Motors Holden, Ford and Toyota). In February 2014 Toyota president Akio Toyoda personally came to Australia to tell his workers of the closure and Toyota’s commitment to its staff through training and other activities has maintained staff commitment at our local Altona plant with everyone working to make the “last car the best global car!”.

The difference between the “people first equals customer first” attitude demonstrated in the approach to closing the Altona plant where people are still being released for paid training to up skill for new roles and the ‘customer last’ approach that dominated the Lexus saga is staggering.  The reaffirmation of the ‘Toyota Way’ may have been driven in part by the Lexus disaster but this does not explain why quality and customer service was allowed to fail so badly in the company that practically invented modern quality.

Volkswagen

A similar dichotomy is apparent in the Volkswagen diesel engine emissions scandal.  A company renowned for engineering excellence, from a country renowned for engineering excellence allowed engineering standards to slip to a point where the cars being sold were illegal.  The actual emissions were only part of the problem, Volkswagen engineers had developed a software program dubbed the ‘diesel dupe’ that could detect when the cars were being tested and change the engine performance to improve results. When the cars were operating under controlled laboratory conditions – which typically involve putting them on a stationary test rig – the device appears to have put the vehicle into a sort of safety mode in which the engine ran below normal power and performance thereby reducing emissions. Once on the road, the engines switched out of this test mode.

Governance issues

Neither of these issues involved ‘a few bad apples’ – the excuse used by most institutions to explain banking and financial scandals. They both required extensive management involvement and cover-ups or acquiescence. A substantial subset of both organisation’s management felt that doing the wrong thing was in the best interests of either themselves or the organisation (or both, at least in the short term). But the governing bodies of both organisations would seem to have maintained a commitment to their overall philosophy, the ‘Toyota Way’ and ‘Engineering excellence’.  So what caused the governance failure?

Governmentality

One element that seems central to both of these failures was a breakdown in the willingness of managers to comply with the overall governance philosophy of the organisation which in turn caused the governance processes to fail; this is the domain of governmentality. Governance cannot be successfully imposed on a population that does not want to be governed!

Governmentality is a term coined by philosopher Michel Foucault around 1980 and refers to the way in which the state (or another governing body) exercises control over, or governs, the body of its populace. The concept involves a complex series of two-way transactions involving:

• the way governing bodies try to produce the people best suited to fulfil those governments’ policies;
• the organised practices (mentalities, rationalities, and techniques) through which people are governed, and
• the techniques and strategies by which a society is rendered governable.

In the same way as governments rely on most people complying with legislation most of the time, organisational governance mechanisms such as ‘project management offices’ and ‘portfolio management’ cannot function effectively without the cooperation of the people being governed. When governmentality breaks down and people no longer support the governance processes they cease to be effective.

The challenge facing every governing body, in every organisation, is in three parts

1. Creating an authentic vision and mission for the organisation.
2. Creating an effective governance system that supports the achievement of the vision.
3. Creating and maintaining an ethical culture that embraces and supports governmentality.

Effective governance systems can weed out the bad apples and correct errors, but they cannot oversee the actions of every manager all of the time if the majority of people do not wish to follow the governance dictates, or actively work to subvert them.

Developing the ‘right culture’ by employing the right people (and importantly offloading the wrong people) starts at the top.  The governing body needs to ‘walk the talk’, their CEO and senior executives need to model the desired behaviours and ‘doing the right thing’ needs to be encouraged throughout the organisation.

Achieving this requires authenticity and a holistic approach to the way the organisation functions; all of the elements need to work together cohesively. Achieving this is the primary responsibility and challenge for the ‘governing body’, in most organisations, the Board of Directors!

If you get the vision, mission and culture right, even major lapses such as the ‘Lexus unintended acceleration problem’ can be overcome.  Despite the damage this caused, Toyota is now the world’s largest automotive manufacturer with a market capitalisation that is nearly double that of Ford and GM combined.  This is also the reason why Objectives, ethics and culture are the top three elements in my model for the ‘Functions of Governance’.

Stakeholders and Reputational Risk

Your reputation and your organisation’s reputation are valuable assets that need nurturing. The willingness of others to trust you, their desire to work with you and virtually every other aspect of the relationship between you and your stakeholders is influenced by their perception of your reputation (see more on The value of trust).  But reputations are fragile: they can take a lifetime to build and seconds to lose.  Some of the factors influencing them are:

1. Reputation cannot be controlled: it exists in the minds of others so it can only be influenced, not managed directly.
2. Reputation is earned: trust is based on consistent behaviour and performance.
3. Reputation is not consistent: it depends on each stakeholder’s view. One organisation can have many different reputations, varying with each stakeholder.
4. Reputation will vary: each stakeholder brings a different expectation of behaviour or performance and so will have a distinct perception of reputation.
5. Reputation is relational: you have a reputation with someone for something. The key question is therefore: ‘with whom, for what?’
6. Reputation is comparative: it is valued in comparison to what a particular stakeholder experiences or believes in relation to peers, performance and prejudice.
7. Reputation is valuable: but the true value of reputation can only be appreciated once it is lost or damaged.

Estimating the ‘true value’ of your reputation is difficult and as a consequence decisions on how much to invest in enhancing and protecting your reputation becomes a value judgment rather than a calculation. Your reputation is created and threatened by both your actions and their consequences (intended or not).  Some actions and their effects on your reputation are predictable, others are less so and their consequences, good or bad are even less certain. This is true regardless of your intention; unexpected outcomes can easily cause unintended benefit or damage to your reputation.

Building a reputation requires hard work and consistency; the challenge is protecting your hard earned reputation against risks that can cause damage; and you never know for sure what will cause reputational damage until it is too late – many reputational risks are emergent.

Managing Reputational Risk in Organisations

Because an organisation’s reputation is not easy to value or protect, managing reputational risk is difficult! This is particularly true for larger organisations where thousands of different interactions between staff and stakeholders are occurring daily.

The first step in managing an organisation’s reputational risk is to understand the scope of possible damage, as well as potential sources and the degree of possible disruption. The consequence of a loss of reputation is always the withdrawing of stakeholder support:

• In the private sector this is usually investor flight and share value decline; these can spiral out of control if confidence cannot be restored.
• In the public sector this is typically withdrawal of government support to reflect declining confidence.
• In the professional sector client confidence is vital for business sustainability; a loss of reputation means a loss of clients.

Each sector can point to scenarios where the impact of reputation damage can vary from mild to catastrophic; and whilst the consequences can be measured after the effect they are not always predictable in advance.  To overcome this problem, managing reputation risk for an organisation requires three steps:

• Predict: All risk is future uncertainty, and an appropriate risk forecasting system to identify reputation risk is required – creative thinking is needed here! The outcomes from a reputational risk workshop will be specific to the organisation and the information must feed directly into the governance process if reputation risk is to be taken seriously (see more on The Functions of Governance).
• Prepare: Reputation risk is a collective responsibility, not just the governing body’s. All management and operational staff must recognise the organisation’s reputation is important and take responsibility for protecting it in their interaction with stakeholders. The protection of reputation should also be a key element in the organisation’s disaster recovery plans.
• Protect: A regular vulnerability review will reveal where reputation risk is greatest, and guide actions to prevent possible damage. Each vulnerability must be assessed objectively and actions taken to minimise exposure. Significant risks will need a ‘protection plan’ developed and then implemented and monitored.

Dealing with a Reputational Risk Event

When a risk event occurs, some standard elements needs to be part of the response for individuals and organisations alike. For reputation enhancing risk events, make sure you acknowledge the ‘good luck’ in an appropriately and take advantage of the opportunity in a suitably authentic way. Over-hyping an event will be seen as unauthentic and have a negative effect on reputation; but good news and good outcomes should be celebrated. Reputation threatening risk events need a more proactive approach

• Step 1: Deal with the event itself. You will not protect your reputation by trying to hide the bad news or ignoring the issue.  Proactively work to solve the problem in a way that genuinely minimise harm for as many stakeholders as possible minimises the damage that has to be managed.
• Step 2: Communicate. And keep communicating – organisations need to have a sufficiently senior person available quickly as the contact point and keep the ‘news’ coming. Rumours and creative reporting will always be worse then the fact and will grow to fill the void. All communication needs to be open, honest and as complete as possible at the time.  Where you ‘don’t know’ tell people what you are doing to find out. (see Integrity is the key to delivering bad news successfully).
• Keep your promises and commitments. If this becomes impossible because of changing circumstances tell people as soon as you know, don’t wait for them to find out.
• Follow up afterwards. Actions that show you really care after the event can go a long way towards repairing the damage to your reputation.

Summary

Reputation is ephemeral and a good reputation is difficult to create and maintain. Warren Buffet in his 2015 memo to his top management team in Berkshire Hathaway emphasised that their top priority must be to ‘zealously guard Berkshire’s reputation’. He also reminded his leadership team that ‘we can afford to lose money–even a lot of money. But we can’t afford to lose reputation–even a shred of reputation’ (discussed in Ethics, Culture, Rules and Governance). In the long run I would suggest this is true for every organisation and individual – your reputation is always in the minds of other people!

How to succeed as a PM in 2016

Projects are done by people for people and through the medium of social media, people power is growing.  Successful project managers know this and use it to their advantage; they create a team culture focused on working with other stakeholders to create success.

Project managers know when they get this right because their project team will challenge, follow and support them, and each other, in order to get the job done. Not only that, but word spreads and other people inside the organisation will want to join the team or be associated with its success. When a PM achieves this, they know they have created something special and paradoxically are under less pressure, can get a good night’s sleep, and as a consequence are fully refreshed each day to keep building the success. This is good for the people and great for the organisation!!

Developing the skills and personal characteristics needed to develop and lead a committed team needs more then technical training. Experience, reflection, coaching and mentoring all help the project manager grow and develop (and it’s a process that never stops). Five signs that they are on the path to becoming a great team leader are:

1. They’re well liked. Great leaders make people feel good about themselves; they speak to people in a way that they like to be spoken to, are clear about what needs to be achieved[1], and are also interested in their lives outside work and display a little vulnerability every now and again to demonstrate that they are human. They’ll always start the day with a ‘good morning’, the evening with a ‘good night’ and every question or interaction will be met with courtesy. When the team picks up on this the project area will be filled with good humour and great productivity.
2. They put effort into building and maintaining teams. Designing great teams takes lots of thought and time – you need the right people ‘on the bus[2]’ and you need to get the wrong people ‘off the bus’. A great project manager doesn’t accept the people who are ‘free’ or ‘on the bench’ unless they’re the right people and they’ll negotiate intensely for the people that they really need, going to great lengths to recruit people into the vision that they have. Once the team is in place, they never stop leading it, building it, encouraging it, performance managing it and celebrating it.
3. They involve everyone in planning. Or at least everyone that matters! The PM identifies the team members and other stakeholders that need to be involved; creates a productive, enjoyable environment, and leads the process. They want to ensure that they get the most out of the time and at the end have a plan that the team has built and believe in.
4. They take the blame and share the credit. Great project managers are like umbrellas. When the criticism is pouring down they ensure that the team is protected from it. They then ensure that the message passed down is presented as an opportunity to improve not a problem to be fixed. Similarly, when the sun is out and the praise is beaming down, they ensure that the people who do the real work bask in it and are rewarded for it. When they talk about how successful a project has been, they talk about the strengths of the team and the qualities they have shown, never about themselves.
5. They manage up well. Stakeholder engagement, particularly senior stakeholder engagement is the key to project success[3]. Great project mangers know they need senior executive support to help clear roadblocks and deliver resources and know how to tap into the organisation’s powerlines for the support they need.

Great project mangers are also good technical managers; they have an adequate understand the technology of the project and they know how the organisation’s management systems and methodologies work. But they also know they can delegate much of this aspect of their work to technologists and administrative experts within their team. And if the team is fully committed to achieving project success, these experts will probably do a better job than the project manager anyway.

Projects are done by people for people and the great project managers know how to lead and motivate[4] ‘their people’ to create a successful team that in turn will work with their stakeholders to create a successful project outcome.

 

[1] For more on delegation see:  http://www.mosaicprojects.com.au/WhitePapers/WP1091_Delegation.pdf

[2] In the classic book Good to Great, Jim Collins says, “…to build a successful organization and team you must get the right people on the bus.”

[3] This is the focus of my book Advising Upwards: A Framework for Understanding and Engaging Senior Management Stakeholders, see http://www.mosaicprojects.com.au/Book_Sales.html#Adv_Up

[4] For more on leadership see: http://www.mosaicprojects.com.au/WhitePapers/WP1014_Leadership.pdf

Does organisational governance exist?

Governance and governing have historically was associated with the role of the Sovereign governing his (or occasionally her) ‘sovereign state’. Over the last five or six centuries the exclusive power of the Sovereign has largely been devolved to governments of one form or another but the functions of making laws, authorising the collection of taxes and providing direction to the citizens of the state remain fundamentally unchanged.

The concept of corporate (or organisational) governance grew out of this overarching concept; to imply there was a similar role within an organisation for a ‘governing body’ to take responsibility for the governance of the organisation. This concept of a governing body setting the ‘rules’ by which an organisation operates and providing guidance on the organization’s objectives has many parallels with the functions of a government.  A government may choose to declare war on another country and provide resources and directions to its military but, at least for the last 2 or 3 centuries, governments have learned not to interfere in the actual conduct of the military campaigns – fighting the war is the responsibility of the professional military. Similarly the governing body of an organisation can set the objectives for the organisation and define the rules by which members of the organisation should operate but is wise to refrain from becoming actively involved in managing the actual work.

The paramount reason for separating governance and management is the simple fact it is almost impossible to take an objective view of work you are actively involved in! With these thoughts in mind, I started to consider the functions and purpose of governance to contrast with the functions and purpose of management.

The functions of management were quite easy to define, the work was done 100 years ago by Henri Fayol in his 1916 book Administration Industrielle et Generale, while there has been some academic argument about the syntax of Fayol’s five functions of management, they have basically stood the test of time. These are outlined in The Functions of Management.

Defining the functions of governance was much more difficult. Almost all of the standard texts describing governance either define:

• The objectives of ‘good governance’; for example Cadbury’s ‘holding the balance between economic and social goals and between individual and communal goals’;
• The principles of ‘good governance’; for example the OECD Principles of Corporate Governance (2004 and the 2015 update); or
• Elements of defined or required practice such as the ASX listing rules and the AICD Governance framework.

None of these sources actually describe what the governing body does or the extent of the governance processes within an organisation.  These are the questions I’ve been focusing on for the last couple of years.

The functions of governance have been described in The Functions of Governance, so far there has been no significant disagreement, that I’m aware of, that would indicate the need for change.  The functions of governance are also mapped to the functions of management and suggest a clear difference in purpose between governance and management that can be summarised as ‘governance sets the objectives and rules for the organisation, management works within the rules to achieve the objectives’.  A closely coupled, symbiotic relationship.

The responsibility for governance seems to be clearly defined by law makers and regulatory authorities.  The governing body is held accountable for the actions of the organisation it governs; this is the Board of Directors in most commercial organisations, in others the person, group or entity accountable for the performance and conformance of the organisation.

Having established the functions of management and governance, the fundamental question posed in this post is does organisational governance exists as a separate entity or is it simply an extension of ‘good management’.  To a degree this is a ‘chicken and egg’ problem.  Does the functioning of an effective governing body lead to ‘good management’ or does ‘good management’ embody the elements of good governance as an integral element in the overall functions of management (ie, Fayol’s five functions need expanding to include governance).

The consequence of the first option is the presences of a governing body which has as its primary function the oversight of the organisation’s management.  The consequence of the second is so-called ‘governing bodies’ such as a Board of Directors, are in effect simply the first, and most senior level of management.

There are a lot of writings that suggest the second option is at least considered viable by many commentators.  This month’s magazine published by the Australian Institute of Company Directors  contained a number of articles on ‘cloud technology’ and ‘big data’ suggesting Directors should be making management decisions on a daily basis based on current sales information, etc.  Similarly there are numerous publications describing various mid-to-low level management committees such as project steering committees as ‘governing bodies’ responsible for the ‘governance of’ a project. However, a project steering committee is in essence no different to any other management committee responsible for overseeing the work of a management entity; therefore under this scenario, every management committee responsible for the oversight of a management function is a ‘governing body’. The consequence of this line of argument is the proposition that governance and management are integral and there is no significant difference in the entities that undertake the work. Every level of management from the Board down is responsible for delivering good management which incorporates governance.

The alternate view based largely in corporate regulations and laws suggests the functions and responsibilities the governing body and its management team are discrete and different. The governing body (singular) represents the owners of the organisation and is responsible for governing the organisation to achieve sustained superior performance. The governing body accomplishes this by:

• Defining the objectives of the organisation;
• Determining the desired ethical, cultural and other standards they expect the organisation to work within (‘the rules’);
• Appointing management to accomplish the objectives, working within ‘the rules’; and then
• Ensuring the conformance and performance of their management and the organisation as a whole.

The primary advantage of this approach to governance is the functions of management are separated from the functions of governance. It is virtually impossible to have an impartial view of the work you are engaged in and one of the key responsibilities of the governing body is to oversight the performance of its management; the law says so!

Therefore, I suggest good governance requires a clear separation of the management and governance functions for no other reason than the need for the governing body to be able to objectively oversight the performance of it management. But this raises practical issues.

It is virtually impossible for the governing body to meaningfully oversight the work of 100s of managers and 1000s of staff, contractors and suppliers. Some aspects of governance have to be delegated to the management body.  This requires the following:

• A carefully designed governance framework. Roles, responsibilities, decision limits and escalation paths need to be defined.
• Clear rules for managers to follow in the performance of their management responsibilities. Managers should be personally responsible for following ‘the rules’ and for ensuring the people they manage follow ‘the rules’. Complying with, and conforming to, the objectives, ethics and culture of the organisation should be a condition of employment and a clearly defined management responsibility.
• Ensuring any governance function is separated from the management function being governed. Assurance and conformance cannot be in the same place as management responsibility for performance. For example, a project steering committee should be responsible for providing direction and support to the project management team to ensure the performance of the project and the achievement of the project’s objectives (a management function) – ensuring conformance with ‘the rules’ is also part of this management responsibility. Assurance that these objectives have been achieved is a governance function that has to sit in a separate reporting line. In many organisations the PMO may be the entity tasked with this responsibility.

However, while the governing body by necessity has to devolve aspects of its responsibilities to people and entities within the overall management structure, the governing body remains responsible for the design of the governance framework and accountable to the organisation’s owners and other external stakeholder for the performance and conformance of the organisation and the validity of any assurances provided by the organisation to regulatory authorities.

 

So where does this leave questions such as the use of ‘big data and ‘the cloud’? I would suggest the responsibility of the governing body is to understand the technologies sufficiently to be able to set sensible objectives and ethical parameters for the organisation’s management to work within and then to ensure their management are working to achieve these objectives. It is no more the responsibility of the governing body to ‘manage big data and use it to make decisions on a daily basis’ than it is the responsibility of a steering committee to ‘govern’ a project. The responsibility of the governing body is to govern; the responsibility of a management committee is to manage.

This concept of separate functions and focus is not intended to imply an antagonistic relationship. In the same way every high performance soccer team blends people with different skills and responsibilities into a tight unit, a goal keeper needs very different capabilities to a striker; a high performance organisation needs a blend of capabilities: effective governance, effective management and committed staff. Certainly members of a performing team support each other and will help to correct deficiencies and errors by others within the team (high performance organisations are no different); but if the team start to mix up the skills and responsibilities the overall team performance will suffer (the consequences of steering committees pretending to be governance bodies is discussed in a 2012 post Management -v- Governance).

 

In conclusion, the answer to the opening question is YES, I believe governance and management are different and their functions are different:

• The functions of management are defined in The Functions of Management.
• The functions of governance are defined in The Functions of Governance.

A high performance organisation that is capable of achieving sustained superior performance combines both governance and management in a clearly delineated governance framework, supported by a clearly delineated management structure.