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Balanced Governance: When Failure is Not an Option
More than half of companies undergoing a transformation project fail in the initial phase. And with this failure, organizations only partially achieve the value that should come from transformation — and they can experience overwhelming frustration that transcends the organization. For a company to be successful, it should implement a governance program that is aligned with business goals — with a laser-like focus on achieving value while balancing risk. We see these factors as key considerations for a successful journey:
- Define a transformation program plan
- Address risk by understanding how it aligns to overall transformation goals and the impact if not addressed
- Develop a comprehensive next-level program and governance plan with tracking and reporting
- Identify clear assignment of responsibilities with accountability
- Align individual project goals with overall transformation strategies
- Ensure that both the budget and planning have adequate focus on ensuring that expected benefits and KPIs have been realized.
Defining Value but Ignoring Risk Is Disastrous Governance
Risk does not simply go away if ignored; on the contrary, risk grows and causes even more damage over time. Transformation management offices (TMOs) with a governance structure that accommodates a feedback loop into decision-making for changes in risk can overcome and minimize impact to the value the enterprise transformation is meant to deliver. Additionally, executive leadership must recognize the role of Enterprise Risk and Internal Audit in assessing risk independently and providing effective challenge for balanced governance.
To begin:
- Understand and define the value of transformation and the associated risks
- Understand the impact to transformation value if not remediated
- Drive risk mitigation
- Measure performance against value criteria and risk appetite to ensure transformation is being achieved.
Go Beyond Basic – Implement Next-Level Governance
There must be purposeful focus and organization-wide alignment on achieving the benefits of transformation, finding the union of different executives to align on vision, value and managing risk, and tying it all back to cross-functional alignment. This eliminates silos by focusing on how the value is delivered across the organization’s functional boundaries.
Experienced TMOs implement next-level governance, owning the desired results, balanced with evaluating associated risks. Creating good project- and program-level plans and mapping a critical path to transformation is not enough; these are not the decisive factors for success. Executive meetings must go from information-sharing and status presentations to driving decisions, committing to actions and enforcing accountability.
To have next-level governance, it is important to think differently and understand that governance is not just about control – it’s about value, decisions, guidance, risk and understanding resourcing. It is about plan completeness and understanding dependencies — and the methodologies at play. Regardless of whether Agile, waterfall or hybrid approaches are used, there will be complex dependencies. TMOs have an opportunity to rise above the transformation dust by understanding how all pieces fit together to provide a critical path that is transparent and comprehensive — one that establishes effective and efficient workflow to achieve goals regardless of approach.
When complex dependencies are not sufficiently addressed, completeness, accuracy, velocity and effectiveness suffer. For example, a transformation program team that pushes out the end date of development can create an overlap with validation phases like system, integration and user acceptance testing (SIT and UAT). If development is ongoing during these validation phases, the overlap will make it much more challenging to ensure the completeness and accuracy of the testing due to potential changes in the underlying technology. Ongoing analysis of phase gating criteria, paired with focused discussions of risks as part of the ongoing governance approach, can help organizations make better informed and intentional decisions on the balance between flexibility and adverse business outcomes.
Many Factors to Resource Sufficiency
A key element to effective governance is having a TMO that establishes clear roles and responsibilities, along with accountability. Roles and responsibilities should be inclusive of all key stakeholders, from the TMO and core project team members to key business and technology owners, vendors and system integration partners — and last, but no less important, leadership comprising the program governance functions. Consider whether the organization has:
- Aligned the right resources and skills to be successful
- Determined the risks and impacts to achieving defined value
- Created a transformation command center equipped to establish the reality of the transformation in a way that is aligned across various project teams while solving for capacity and resource constraints (people, time and budget)
- Identified all program tasks and dependencies to ensure comprehensive management; while this is not directly resource-oriented, if we miss an upstream effort and fail to engage that team (and hold them to account), the project is at risk.
See the Forest through the Trees
Successful TMOs align individual project team goals with the benefits of overall transformation. A scenario where the system integrator believes their team is on par — while the business has serious resource shortfalls and unaddressed dependencies — does not have transformation alignment.
While teams engaged on complex programs can be effective at individually managing themselves, the crossroads are determined by how the teams work together. While it is one thing to manage a team of six, 10 or 20 people, it is another thing entirely to manage a team of hundreds who must all achieve a common goal, requiring elevated program management and governance.
Team dependencies, as well as activities and goals of each program team, must be knitted together and aligned with transformation value. The TMO must ensure that decision-making at the team level is not decreasing the value proposition of the overall program.
Performance Management
Successful governance structures have a clear path for actionable, effective decision-making, born from performance that is properly measured and managed. Regular, transparent updates on performance and value delivery should be presented throughout the project life cycle to provide insight into the progression of that work vs. targets. Examples include:
- Data conversion —measures conversion-specific metrics for each data object being converted (e.g., time to convert, fallout/error percentages, etc.).
- SIT —measures testing progression against functional requirement points, as well as incidence of issues by severity
- UAT —measures testing progression against end-to-end business process scenario outcomes, not just the same functional points as SIT (e.g., order initiated through cash received as a transaction scenario), as well as incidence of issues by severity.
Reaping – and Measuring – the Benefits
One of the most overlooked aspects from a governance perspective is the realization and measurement of results and value, which are often tracked with overall transformation KPIs. It’s not uncommon for transformation teams, once the project is completed, to hand over delivery to the functional or technology stakeholders and either leave the organization or return to their business-as-usual roles.
Planning — and budget — to measure the end results is often overlooked. A successful governance program should ensure that there is adequate focus on evaluating and measuring the end results to ensure that the planned benefits and KPIs have been achieved.
Transformation value is achieved by successfully managing the execution of the program across all workstreams and effectively managing against risk and value criteria, recognizing that risk mitigation is a key enabler activity to unlocking transformation value. Over time, balanced governance evolves and adapts by leveraging on a transformation command center. Starting with governance in mind and adapting throughout the transformation will enable the program to be a success.
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