Defining Management

March 26, 2013

A consistent theme in these posts is the assertion that governance and management are different processes undertaken by different entities within an organisation. In short, Directors or their equivalent govern, Managers manage.

This assertion is supported by the unequivocal view of governments, the OECD, stock exchanges world-wide, various ISO Standards, various Institutes of Company Directors and the Association for Project Management in the UK. The various laws, standards, definitions and guidelines published by these bodies all agree the Board has the exclusive responsibility to govern all aspects of the organisation and this includes the governance of project and program management activities.

The governance function has two key aspects; the first is deciding what the organisation should be and how it should function. These governance decisions are communicated to management for implementation and the primary outputs from this part of the governance system are:

  • The strategic objectives of the organisation framed within its mission, values and ethical framework.
  • The policy framework the organisation is expected to operate within.
  • The appointment of key managers to manage the organisation.

The second aspect of the governance system is oversight and assurance. The governing body should pro-actively seek assurance from its management that the strategic objectives and policies are being correctly achieved or implemented. The assurance and oversight functions include:

  • Agreeing the organisations current strategic plan (in conjunction with executive management). The strategic plan describes how the strategic objectives will be achieved.
  • Suggesting or approving changes to the strategic plan to respond to changing circumstances.
  • Requiring effective assurance from management that the organisations policy framework is being adhered to.
  • Requiring effective assurance from management that the organisations resources are being used as efficiently as practical in pursuit of its strategic objectives.
  • Communicating the relevant elements of the assurances received from management to appropriate external stakeholders.
  • Assurance to the organisation’s owners the strategy and policies are being adhered to by management and the organisation as a whole.
  • Assurance to a wider stakeholder community (including regulatory authorities) the organisation is operating properly.

From the list above, it is obvious that the governance system cannot operate without the effective support of the organisation’s management system. And, if governance and management are different systems within an organisation, they should have different functions creating different outputs. We believe this is the case and the purpose of this post is to define what management is and does.

The functions of management were defined by Henri Fayol (1841 – 1925) in his general theory of business administration and surprisingly, this is still seen as a one of the basic definitions of management. He proposed that there were five primary functions of management and 14 principles of management:

Fayol’s Functions of Management

  1. to forecast and plan,
  2. to organise
  3. to command or direct
  4. to coordinate
  5. to control (French: contrôller: in the sense that a manager must receive feedback about a process in order to make necessary adjustments and must analyse the deviations.).

Inherent in these functions is decision making!  The primary role of management is to make decisions and value judgements within the framework set by the governing body to achieve the objectives set by the governing body. The primary output from management can be defined as information and instructions that have to be communicated to others.

The communication is firstly to the workers so they understand what has to be produced, where and when; secondly to the governing body to provide assurance that the right decisions have been made and the right things are being produced in the right ways applying the organisation’s policy framework correctly.

Fayol’s Principles of Management

The principles of management define some of the ways the functions of management can be implemented – some of theses principles need adjusting to remain effective in modern organisations but the concepts are still valid:

  1. Division of work. This principle is the same as Adam Smith’s ‘division of labour’. Specialisation increases output by making employees more efficient.
  2. Authority. Managers must be able to give orders. Authority gives them this right. Note that responsibility arises wherever authority is exercised.
  3. Discipline. Employees must obey and respect the rules that govern the organisation. Good discipline is the result of effective leadership, a clear understanding between management and workers regarding the organisation’s rules, and the judicious use of penalties for infractions of the rules.
  4. Unity of command. Every employee should receive orders from only one superior, from top to bottom in an organisation (not practical in matrix organisations).
  5. Unity of direction. Each group of organisational activities that have the same objective should be directed by one manager using one plan.
  6. Subordination of individual interests to the general interest. The interests of any one employee or group of employees should not take precedence over the interests of the organisation as a whole.
  7. Remuneration. Workers must be paid a fair wage for their services.
  8. Centralisation. Centralisation refers to the degree to which subordinates are involved in decision making. Whether decision making is centralized (to management) or decentralized (to subordinates) is a question of proper proportion. The task is to find the optimum degree of centralisation for each situation.
  9. Scalar chain. The line of authority from top management to the lowest ranks represents the scalar chain. Communications should follow this chain. However, if following the chain creates delays, cross-communications can be allowed if agreed to by all parties and superiors are kept informed.
  10. Order. People and materials should be in the right place at the right time.
  11. Equity. Managers should be kind and fair to their subordinates.
  12. Stability of tenure of personnel. High employee turnover is inefficient. Management should provide orderly personnel planning and ensure that replacements are available to fill vacancies.
  13. Initiative. Employees who are allowed to originate and carry out plans will exert high levels of effort.
  14. Esprit de corps. Promoting team spirit will build harmony and unity within the organisation.

Whilst some authorities have added to and changed some aspects of Fayol’s work in the intervening 100 years, these additions and changes have generally expanded and clarified the concepts outlined above. In general terms Fayol’s work has stood the test of time, has been shown to be relevant and appropriate to contemporary management and defines what management is and does. A person undertaking any of the five functions, or employing any of the 14 principles is engaged in management (not governance).

What I believe this post makes crystal clear though is the difference between governance and management – when a manager is deciding the best options or seeking information on actual performance to use in decisions the manager is managing.

The Standard for Program Management—Third Edition

March 21, 2013

The most noticeable thing about the new Standard for Program Management—Third Edition is that is has gone on a major diet! The 2nd Edition was 271 page long (plus appendix), the 3rd Edition is less than half the size at 106 pages plus appendix. Unfortunately the price has not moved in the same direction.

The Standard still provides a detailed understanding of program management and promotes efficient and effective communication and coordination among various project management groups. The major updates include:

  • Program Life Cycle has been assigned its own chapter for the third edition to provide the details of the unique set of elements that makes up the program management phase.
  • The third edition highlights the full scope of program management and clarifies the supporting processes that complete the delivery of programs in the organizational setting.
  • A more detailed definition of program management within an organization is provided, including the fundamental differences between project management and program management.

The major focus of the revision seems to be removing a lot of the ‘project management’ information that is found in the PMBOK® Guide and focusing on the role of program management in organisations, the unique characteristics of program management work and the role of the program manager. A shift from process to principle, that is aligned with the Program Management Role Delineation Study that forms the basis for the PgMP examination.

The framework in the Third Edition is:

  • Introduction
  • Program Management Performance Domains
  • Program Strategy Alignment
  • Program Benefits Management
  • Program Stakeholder Engagement
  • Program Governance
  • Program Life Cycle Management
  • Program Management Supporting Processes

The relationship between the Program Management Performance Domains that makes up the bulk of the standard is illustrated below.


In addition to the core standard, Appendix X4 on Program Management Competencies, and X5 on Program Management Artefacts are very succinct and useful.

A couple of shortcomings in this version of the standard are firstly the limited recognition of the different type of program that organisations run. The PMI standard is very much centred on the ‘strategic program’ defined in the GAPPS typology discussed in our White Paper Defining Program Types. In particular the GAPPS ‘Operational Program’ typology has been largely ignored in the PMI standard.

The other is the classic confusion between the Enterprise level executive management responsibilities that are critical for the support and oversight of the work of the Program Manager and Organisational Governance typical of documentation produced by working managers. What the standard describes as ‘governance’ is the critical management responsibilities of senior executives to adequately support oversight and manage the process of ‘program management’. Governance is the process of oversighting the whole management system, that is performed by the ‘governing body’ which is the Board of Directors in most commercial organisations and their equivalent in other types of organisation – governors govern, managers manage! For more on this critical distinction see: WP1084 Governance Systems & Management Systems. The contents of the ‘governance’ section are good, just miss-labelled.

Overall this is a significantly improved standard – a lot of duplication and redundancy has been removed, and the key functions and processes of program management and what organisations need to do at the enterprise level to support programs are well though through and laid out. This new standard is available in Australia from:

PERT – What’s in a name?

March 18, 2013


I could choose to call the image at the top of this page a tennis ball – it is about the right shape and is a bright colour, but if I chose to do so all that results is confusion! The name we call things matters because it communicates what we are talking about to our audience.

Over the last week we have been dragged into a number of Linked-In discussions focused on questions such as ‘Do you use PERT?’  Partly as a result of our latest blog on the PMBOK 5th Edition and also because Mosaic Project Services (and particularly Patrick) has a high profile writing about scheduling history.

The overriding conclusion from the debates we’ve witnessed is no-one knows for sure who is saying what. Each user of the term PERT may be referring to a Network Diagram, a Monte Carlo simulation, some other simulation or the actual PERT technique developed in the 1950s. If the basic premise of the debate is not clearly defined the net result is a lot of noise and no possibility of reaching a conclusion of consensus – in exactly the same way as playing tennis using the ‘ball’ pictured above, all you end up with is a mess.

I’m not sure why so many organisations and people chose to use names that have a very specific meaning completely out of context but it seems increasingly commonplace:

  • it may simply be a lack of awareness, assisted by seeing many similar incorrect usages of the name;
  • it may be a desire to look clever by using technical jargon, which of course backfires big-time as soon as someone who knows hears the misuse;
  • it may be an overt commercial move to trade off a well know ‘brand’ to make a tool or offering seem better than it is.

What is important to consider though, is apart from the first option none of the other factors are ethical behaviour and all of the factors destroy effective communication.

To help bring some level of knowledge into the discussions around PERT, we have published a White Paper today on ‘Understanding PERT’.  This paper outlines exactly what PERT is and was, identifies the shortcomings in the technique and delineates what PERT ‘is not’ and the reasons. After everyone has understood what PERT is and is not, let the debates continue but this time with the effective communication of ideas between the protagonists, ie, a communication in which the receiver actually understand what the sender is meaning.

The alternative was effectively described by Robert McCloskey, a US State Department Spokesman several years ago ‘I know that you believe that you understood what you think I said, but I am not sure you realise that what you heard is not what I meant!’  Effective communication needs a mutual understanding of the terms used.

Download the PERT White Paper

PMBOK® Guide 5th Edition – Some Technical Differences

March 15, 2013

We are busily working through the PMBOK® Guide 5th Edition updating Mosaic’s PMI training courses  ready for the scheduled examination changes. Three of the more technical changes (out of many) are:

The Good:
Quality management has been tidied up. The seven basic tools of quality management are now dealt with in on place, once, in and referenced through the rest of the chapter. The ‘magnificent 7’ are: Cause and Effect Diagrams, Flow charts, Checksheets (checklist), Pareto Diagrams, histograms, control charts and scatter diagrams. Other specific techniques are discussed in the appropriate process. There is also an attempt to relate the different project/quality cycles including the basic process groups, the ‘Plan-Do-Check-Act cycle, the cost of quality and quality assurance and control.

The Bad:
Monte Carlo is missing from Time Management and Cost Management! One area that needs a major update in the 6th Edition are the aspects of time and cost management focused on three point estimates and variability. Monte Carlo has been moved out of the section into the Risk chapter, and is defined as the source of ‘contingencies’ and as a means of ‘simulating’ schedule outcomes. Very little is included about the ways simulation through Monte Carlo are developed or used. In particular, there is no discussion of how different distributions should be chosen based on the available data. Understanding the range of potential outcomes is a critical time and cost management process as is the interactions between time and cost. The treatment in the Risk chapter is not bad, just in the wrong place, hopefully in the 6th Edition the consideration of modelling outcomes will move back into the Time and Cost chapters. Or there will be far clearer links drawn between the development of the raw data and its use in cost and time management.

The Ugly:
For some reason PMI keeps bringing PERT back into consideration, ensuring the unfortunate confusion around PERT will persist for another 4 years at least! The completely inaccurate reference to ‘PERT Cost’ that crept into the 4th Edition has been killed off but the concept has reappeared in Duration Estimating (, Quality Assurance ( and the glossary.

There is nothing wrong with PERT being in the PMBOK if the technique is defined properly. PERT is a simplistic technique that applies a single modified beta distribution and an approximation of the calculation for Standard Deviation (a polite term for inaccurate), to the activities on the critical path in a single calculation to determine the the mean (p50) completion date and the effect of adding 1 Standard Deviation to approximate the p80 completion (ie, the date with an 80% probability of being achieved or bettered). PERT is prone to errors including the ‘PERT Merge Bias’ which describes the effect of a nominally sub-critical path finishing later than the critical path.

However, PERT is not synonymous with three point estimating and despite a number of software vendors making the same mistake and using a ‘cute name’ to make their uncertainty calculations sound sexy any computation that involves simulation, different distribution options or calculating the whole network is not PERT.

PERT has an important place in history and is a useful teaching tool because you can do the calculations manually. But confusing this venerable technique with simulation and three point estimating helps no one. This creates a significant communication problem – when a planner says he has done a PERT analysis you have no idea if this means a full Monte Carlo simulation, a manual PERT calculation described above or something in between. As a professional body PMI has let everyone down perpetuating this confusion.

The End:
Overall the PMBOK® Guide 5th Edition is still a significant improvement; our earlier posts have highlighted many of these changes:

To read our earlier comments:

To see more on the book:
– In Australia:
– Other places:

Be careful what you govern for!

March 9, 2013

Governance is an interesting and subtle process which is not helped by confusing governance with management or organisational maturity. A recent discussion in PM World Journal on the subject of governance and management highlighted an interesting issue that we have touched on in the past.

The Romans were undoubtedly good builders and managers (see: The Roman Approach to Contract Risk Management). They also had effective governance and management processes, when a contractor was engaged to build something, they had a clear vision of what they wanted to accomplish; assigned responsibilities and accountability effectively; and failure had clearly understood, significant consequences.

Roman bridge builders were called pontiff. One of the quality control processes used to ensure the effective construction of bridges and other similar structures was to ensure the pontiffs were the first to cross their newly completed construction with their chariots to demonstrate that their product was safe.


An ancient Roman bridge

This governance focus on safety and sanctions created very strong bridges some of which survive in use to the present day but this governance policy also stymied innovation. Roman architecture and engineering practice did not change significantly in the last 400 years of the empire!

No sensible pontiff would risk his life to test an innovative approach to bridge design or construction when the governance systems he operated under focus on avoiding failure. Or in more general terms; the management response to a governance regime focused on ‘no failure’ backed up by the application of sanctions is to implement rigid processes. The problem is rigid process prevents improvement.

To realise the significance of this consider the technology in use in the 17th century compared to the modern day – the vast majority of the innovations that have resulted in today’s improved living standards are the result of learning from failure (see: How to Suffer Successfully).

But the solution is not that simple, we know that well designed and implemented, processes are definitely advantageous. There is a significant body of research that shows implementing methodologies and processes using CMMI, OPM3, PRINCE2, P3M3 and other similar frameworks has a major impact on improving organisational performance and outcomes.

However, organisational maturity is a similar ‘two edged sword’ to rigid governance and management requirements. We know organisational maturity defined as the use of standardised processes and procedures creates significant benefits in terms of reduced error and increased effectiveness compared to laissez-faire / ad hoc systems with little or no standardisation. But these improvements can evolve to become an innovation-sapping straightjacket.

Too much standardisation creates processes paralysis and a focus on doing the process rather than achieving an outcome. In organisations that that have become fixated on ‘process’, it is common to see more and more process introduced to over come the problem of process paralysis which in turn consume more valuable time and resources until Cohn’s Law is proved: The more time you spend in reporting on what you are doing, the less time you have to do anything. Stability is achieved when you spend all your time doing nothing but reporting on the nothing you are doing.

Avoiding this type of paralysis before a review is forced by a major crisis is a subtle, but critical, governance challenge. The governing body sets the moral and ethical ‘tone’ for the organisation, determines strategy and decides what is important. Executive Management’s role is to implement the governing body’s intentions, which includes determining the organisation’s approach to process and methodology, and middle and lower level management’s role is to implement these directives (for more on this see: Governance Systems & Management Systems). The governance challenge is working out a way to implement efficient systems that also encourage an appropriate degree of innovation and experimentation. The ultimate level in CMMI and OPM3 is ‘continuous improvement’. But improvement means change and change requires research, experimentation and risk taking. As Albert Einstein once said, “If we knew what it was we were doing, it would not be called research, would it?”

To stay with the Roman theme of this post: Finis origine pendet (quoting 1st century AD Roman poet and astronomer Marcus Manilius: The end depends upon the beginning). The challenge of effective governance is to encourage flexibility and innovation where this is appropriate (ie, to encourage the taking of appropriate risks to change and improve the organisation) whilst ensuring due process is followed when this is important. The challenge is knowing when each is appropriate and then disseminating this understanding throughout the organisation.

Organisations that follow the Roman approach to governance and avoid taking any form risk are doomed to fade into oblivion sooner or later.


Note: According to the usual interpretation, the term pontifex literally means “bridge-builder” (pons + facere). The position of bridge-builder was an important one in Rome, where the major bridges were over the Tiber, the sacred river (and a deity). Only prestigious authorities with sacral functions could be allowed to ‘disturb’ it with mechanical additions.

However, the term was always understood in its symbolic sense as well: the pontifices were the ones who smoothed the ‘bridge’ between gods and men. In ancient Rome, the Pontifex Maximus (Latin, literally: “greatest pontiff”) was the high priest of the College of Pontiffs (Collegium Pontificum), the most important religious role in the republic. The word “pontifex” later became a term used for bishops in the early Catholic Church and the Bishop of Rome, the Pope, the highest of bridge-builders sumus pontiff.

PMI’s Standard for Portfolio Management

March 7, 2013

The publication of the third edition of PMIs Standard for Portfolio Management represents a significant step forward in linking the performance of project and programs to the achievement of the organisations vision, mission and strategy.

One of the key additions is the introduction of the ‘Portfolio Strategic Management’ process group. The standard’s fundamental proposition is that efficient portfolio management is integral to the implementation of the organization’s overall strategic plan. While project and program management focus on doing the work right, the purpose of portfolio management is to ensure the organisation is investing its limited resources in doing the right work.

As with any portfolio the optimum return is achieved through an appropriate diversification of risk. Short term, low risk, low return projects will not build the organisation of the future, investments to maintain and expand current capabilities need to be off-set by some future focused, high risk high reward projects to develop new capabilities, products or services. The challenge is developing a balanced portfolio that maximises stakeholder value overall, and this needs a practical strategic plan as the basis for developing the portfolio strategy.

The challenge facing most organisations is developing systems to efficiently link innovation, strategy, portfolio management, project execution, organisational change management and the realisation of value. Any weak point in this ‘value chain’ will reduce the return on its investment in projects and programs achieved by the organisation. Establishing systems to achieve this linkage is a key management challenge, ensuring they are in place is a key governance responsibility. We have posted on this topic several times:

Linking Innovation to Value

The failure of strategic planning

Who Manages Benefits?

Benefits and Value (White Paper)

The updated Standard for Portfolio Management provides an authoritative resource to assist organisations in the overall development of an effective value delivery capability.

One of the elements we really like if that PMI have separated the management of the portfolio (effectively investment decisions and oversight) from the need for organisations to manage their project delivery capability. The ‘enterprise project management’ system that develops and nurtures project delivery capability (see: PCD White Paper) should be quite separate from the portfolio investment decision making process. There is a fundamental conflict of interest created if the same management body is responsible for decisions to ‘kill’ projects that are no longer viable whilst at the same time supporting and nurturing the project team to help them remain viable. PMI have not fallen into this trap!!

Stocks of the PMI Standard for Portfolio Management Third Edition are available world-wide. Australian readers can buy from:

For other PMI standards see: