Organizational Vs. Project Governance: Differences in the Decision Making Process

Large, complex enterprise projects – such as EHR or ERPs – have started to create an interesting dynamic between organizational governance and project governance.  

Organizational Governance

Organizational governance refers to the policies, processes, roles, responsibilities and decision rights for the organization. An organizational structure is normally well designed with an individual at the top, having all areas of responsibility below him or her very clearly defined.  For example, if we start with a Chief Financial Officer (CFO) and work our way down, there are multiple directors, each of whom are responsible for their individual departments or areas with clearly defined decision rights.  Each director may have multiple managers, supervisors and individual contributors reporting to them.

As you can see, the organizational tree just continues to grow. Generally, these organizational structures are very logical and make plain sense.  Most decisions that are made by directors or managers are primarily in areas for which they are responsible. Based on rules and guidelines, managers can make changes to their area of responsibility as long as it doesn’t affect another area or the budget of funds they have has approved at the start of the fiscal year.

Organizationally structured groups have a clear understanding of the organizational goals and usually understand how their work will affect their teammates, managers, directors and c-suite leaders above them.  Even if some processes change and people leave over time, these systems are generally stable and in place for years. Expectations of how all levels of the management tree interact with each other clearly understood from top to bottom because these decision rights have been in place for years

“Organizational structures are primarily designed to facilitate the effective operation of a business on a day-to-day basis.” – Ross Garland, Project Governance – A Practical Guide to Effective Project Decision Making

Project Governance

Project governance refers to the decision-making framework set up to enable a project to make decisions in order to deliver its scope within a specific budget and timeline.  The challenge with large projects is that they break up the standard organizational governance methodology. Many times, the decisions, issues and risks associated with a project also directly impact the operational areas to which individuals are assigned.

If we look at project governance relative to organizational governance, these overlaps and differences can be very telling. Using the CFO in a large healthcare system as an example, they may have as many as 5,000 people under them with a management chain of at least 400 leads, managers, directors and vice presidents. There may only be 30 to 40 of these staff members assigned to the project governance as either a member of an advisory committee or a work group. These people are assigned the responsibility of quickly making decisions to meet the needs of the project without going through the process of collaboration they normally would have to manage through in the organizational structure.

Executive level project governance bodies are typically focused on overall guiding principles, strategic fit, scope, budget and timeline. Below the executive level project governance, multidisciplinary advisory committees are usually formed with representatives that have wide range of experience, varied viewpoints and decision-making processes. For example, a clinical advisory committee may consist of a radiology director, pharmacy director, lab director and nurses. Representatives with different roles who ultimately answer to different leaders across the organization are now a part of an advisory committee and are charged with making decisions tied to the overall guiding principles and goals of a project.  This forces committee members to interpret the direction that the organization might be trying to move. During the life of a large, complex enterprise project – say, two or three years of project ebbs and flows – it can be difficult to see the big picture results for the organization before the project reaches completion.

As a result, individuals who are serving in project governance roles are also part of an organizational governance structure, but are being forced to make decisions in a multidisciplinary area.  In other words, these resources are now making decisions that go beyond the scope of their traditional day-to-day roles and responsibilities and may impacts other teams, as well. This can be a challenge for organizational governance, as this is not the norm for their typical practices.  However, a lot of the decisions being made in project governance can have a direct effect on the organizational governance.

In many cases, project governance becomes stalled due to the individuals wearing the wrong hat at the wrong time when decisions are needed.  They have their operational hat on, worrying about their budget and timeline for this year’s objectives, when they should be wearing their project hat, which is more tied to the strategy to move an organization in a new direction.  This can be difficult because project governance decisions need to be made within a very precise time frame and budget; operational governance does not need to consider these constraints in the same way. Operational decisions can often be put off, with the knowledge that moves can be made down the road.

Two governance structures must coexist during the life of a project, even as the difference in governance size and impact of decisions affect the decision making process.  In order for this to happen, the full complexity of the decisions that must be made by project governance bodies in order to maintain the scope, timeline and budget of the project need to be clearly communicated, both at the beginning of the project and throughout its life.

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