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INTRODUCTION

1.1 The Purpose and Need for this Guide

This practice guide provides guidance to practitioners and organizations for the governance of portfolios, programs, and projects. This practice guide strives to advance the topic of portfolio, program, and project governance by capturing practices from conceptualization to implementation, which practitioners and organizations should find informative and useful. This guide presents the following:

• Reference for portfolio, program, and project governance for senior executives, functional managers, as well as senior portfolio, program, and project management leadership;
• Definition, implementation, and management of effective portfolio, program, project, and organizational project management (OPM) governance;
• Practices for creating a governance framework; and
• Guidance for most organizations, including governmental, nongovernmental for-profit, and not-for-profit private and public entities that may be implementing or enhancing governance for portfolios, programs, and projects.

Implementation of an effective portfolio, program, and project governance framework within an organization can be challenging due to factors such as increasing business complexities, regulatory requirements, globalization, and rapid changes in technology and business environments. Other challenges may include inadequate governance, executive sponsorship, support, and understanding of portfolio, program, and project management. For projects and programs executed by more than one organization (e.g., a joint venture), governance becomes more complex. Any governance framework should be dynamic and responsive in adapting to changing portfolio, program, and project environments. Effective governance of portfolios, programs, and projects focuses not only on compliance with policies, procedures, laws, and regulations, but also on informed judgment regarding decision making to meet organizational objectives.

People at every level of the organization and external stakeholders have an impact on the governance framework for portfolios, programs, and projects. This topic is of great interest to organizations, because ineffective governance is often noted in literature and research findings as a source of project delays, failures, or other negative consequences. Moreover, there is minimal holistic treatment of this topic in portfolio, program, and project management literature. In 2014, the Project Management Institute (PMI) did an extensive review of extant research published in the fields of project management and allied disciplines regarding governance of projects, programs, and portfolios. For an overview of those findings, see Appendix X2. An effective governance framework can help to ensure an organization's alignment of strategy and its subsequent execution by providing appropriate oversight, leadership, and guidance.

This practice guide uses the term “organization” to refer to an entire or subset of a company, agency, association, or business unit, including for-profit, not-for-profit, and government organizations.

1.2 The Intended Audience

This practice guide is intended for practitioners and organizations that would like to create an environment to accelerate the implementation of strategy and achievement of organizational objectives while establishing transparency and confidence in decision making and clarity of roles and responsibilities. This practice guide applies to all types and sizes of organizations and may include:

• Board of directors or their representatives;
• Executives;
• Nonfunctional management staff that may be responsible for oversight of portfolios, programs, and projects;
• Members of portfolio, program, and project management offices (PMOs) and centers of excellence;
• Portfolio, program, and project management practitioners;
• Portfolio, program, and project team members and stakeholders;
• Functional managers, including those who manage portfolio, program, and project management professionals; and
• Educators, consultants, and process specialists in portfolio, program, and project management.

1.3 Overview of the Practice Guide

This practice guide is organized in a structured fashion so the user is able to locate section(s) that are of particular interest. It is not necessarily written to be read in its entirety, but rather to allow users to focus on the specific section(s) that are of greatest interest. Some information is repeated in one or more sections so that each individual section may be understood on its own and at the individual portfolio, program, and project governance level. It is recommended that the user begin by reading Section 1 (Introduction) prior to reading any other sections of interest as follows:

• Section 2: Organizational Project Management (OPM) Governance. Describes OPM governance; tailoring governance; governance relationships and considerations; roles and responsibilities; and domains, functions, and processes. Describes how governance can be implemented as a governance program or project for integrated portfolio, program, and project governance.
• Section 3: Governance at the Portfolio Level. Describes portfolio governance; governance relationships and considerations; roles and responsibilities; and domains, functions, and processes. Describes how governance can be implemented within a portfolio management process cycle.
• Section 4: Governance at the Program Level. Describes program governance; governance relationships and considerations; roles and responsibilities; and domains, functions, and processes. Describes how governance can be implemented within a program life cycle.
• Section 5: Governance at the Project Level. Describes project governance; governance relationships and considerations; roles and responsibilities; and domains, functions, and processes. Describes how governance can be implemented within a project life cycle.

1.4 Overview of Governance Related to Portfolio, Program, and Project Management

Governance is an enabler of good portfolio, program, and project management and also an important element for successful portfolios, programs, and projects. Governance typically focuses on who makes the decisions (decision rights and authority structures), how the decisions are made (processes/procedures), and collaboration enablers (trust, flexibility, and behavioral controls), thereby defining the governance framework within which decisions are made and decision makers are held accountable.

When discussing governance, it is important to distinguish that there are various types that may exist:

• Governance of organizations. Many organizations have principles, policies, and procedures to provide guidance for how an organization is directed and controlled. Organizational governance principles are approved by the organization's highest-level governing body and may include clarity of roles and authorities, ethics, accountability, transparency, social responsibility, and a variety of other principles that are unique to each organization. Organizational policies are the mechanism used to support and communicate these principles so that the governing board or body is informed of the key strategic issues and risks facing an organization.
• Governance of portfolio, program, and project management. Some organizations institute organization-wide policies and procedures to oversee and direct portfolio, program, and project practices across multiple portfolios, programs, and projects. Governance at this level may direct how areas of organizational governance are directly linked to individual portfolio, program, and project activities, and are focused on how the portfolio, program, and project management capability is governed overall.
• Governance of portfolios, programs, and projects. This practice guide is focused on how governance is defined and carried out to ensure the success of portfolios, programs, and projects, which includes describing the details of processes, activities, and tasks needed in order to successfully implement or enhance governance of the portfolio, program, or project to produce the desired outcomes or results.

There is no consistent approach to portfolio, program, and project governance in the various organizations and contexts in which they exist. There are multiple definitions of governance in the literature and standards; confusion exists in distinguishing among the governance needs at different levels of portfolio, program, and project management. There are different levels of governance inherent in portfolio, program, and project management, including organizational governance; organizational project management (OPM) governance; and portfolio, program, and project governance. To help bring needed clarity, this practice guide provides definitions for governance in order to distinguish their differences as well as indicate their common elements. Definitions used in this practice guide are unique to the governance of portfolios, programs, and projects. The definitions of governance are:

• Organizational governance. A structured way to provide control, direction, and coordination through people, policies, and processes to meet organizational strategic and operational goals. Organizational governance is typically conducted by a board of directors to ensure accountability, fairness, and transparency to its stakeholders. It typically includes legal, regulatory, compliance, cultural, ethical, environmental, risk, social responsibility, and community functions. Organizational governance principles, decisions, and processes have an impact on the governance of portfolios, programs, and projects. For example, in the United States, the Sarbanes-Oxley Act of 2002 requires management to certify the accuracy of organizational financial reporting. This has a direct impact on the rigor and frequency of reviews for portfolio, program, and project financial controls and reporting.
• OPM governance. The framework, functions, and processes that guide organizational project management activities in order to align portfolio, program, and project management practices to meet organizational strategic and operational goals.
• Portfolio governance. The framework, functions, and processes that guide portfolio management activities in order to optimize investments to meet organizational strategic and operational goals.
• Program governance. The framework, functions, and processes that guide program management activities in order to deliver business value to meet organizational strategic and operational goals.
• Project governance. The framework, functions, and processes that guide project management activities in order to create a unique product, service, or result to meet organizational strategic and operational goals.

Governance terms commonly used in this practice guide are unique to governance of portfolios, programs, and projects and are defined as follows:

• Governing body. A temporary or permanent organized group consisting of members by areas of responsibility and authority to provide guidance and decision making for portfolios, programs, and projects (e.g., boards, steering committees).
• Governance framework. The four governance domains with functions, processes, and activities for portfolios, programs, and projects. Domains and functions are described in Sections 1.6 and 1.7 and in Sections 2 through 5.
• Governance domain. A grouping of functions carried out by an individual, group, or organization to address a specific governance area of concentration. Described in Section 1.6.
• Governance function. A grouping of processes related to each other and across governance domains that are performed in order to support governance for portfolios, programs, and projects. Described in Section 1.7.

Figure 1-1 represents the basic elements of governance that are found in most organizations that execute business strategies through portfolios, programs, and projects. The elements have both a connected and a hierarchical-type relationship. Figure 1-1 presents the dimensions of governance in a simplified manner; in reality, governance is recognized as a complex concept. Governance-related elements are dynamic and should adapt to the changing organizational, portfolio, program, and project environments. The relationship between the complexity of programs and projects and governance resources is discussed in Section 1.5.2.

1.5 Portfolio, Program, and Project Governance versus Portfolio, Program, and Project Management

Portfolio, program, and project governance focuses on overseeing and approving the framework, functions, and processes to provide guidance and decision making for portfolios, programs, and projects.

Portfolio, program, and project management are the implementation activities that are defined, planned, and executed to achieve organizational strategic and operational goals through individual portfolios, programs, and projects.

Portfolio, program, and project governance activities are those that provide guidance, decision making, and management oversight, whereas the portfolio, program, and project management activities are specific to organizing and doing the work of portfolios, programs, and projects. Within an organization or specific portfolio, program, or project, governance and management activities may overlap because there are functions and roles that may be assumed by the same person or group of people. In some organizations or in a particular portfolio, program, or project, governance and management roles may be combined. On some portfolios and programs, the portfolio or program manager may assume a governance role. Table 1-1 shows an example of the key differences between governance and management activities. Although these activities are shown in two columns, one for governance and one for management, the activities in either column may be adapted based on the organizational context. The number of activities in either column does not mean that the activities are equal or that the amount of work effort is comparable.

Table 1-1. Portfolio, Program, and Project Governance and Management Activities

Figure 1-2 demonstrates the portfolio, program, and project governance relationship with organizational governance and shows the portfolio, program, and project management relationship with organizational management. Governance activities ensure that management activities are defined, planned, and implemented within portfolio, program, and project management. Management activities are more operational and tactical than governance activities, which are more strategic and focus on oversight and guidance. Portfolio management may contain more governance activities and fewer management activities relative to program or project management, as portfolio management is a governance mechanism of organizational-level governance used to ensure strategic alignment with organizational objectives. Governance provides oversight and direction for management to ensure the right work is done and also that the work is done right through organizational project management. Please refer to Section 2.2 for more information on organizational project management.

1.5.1 Effective Governance of Portfolios, Programs, and Projects

Achieving effective governance can be very challenging in most organizational environments. Any governance framework should be dynamic and adaptive to the organization's needs, resources, and culture in order to be effective. One approach to achieve effective governance is through continuous improvement, which is a strategy where organizations develop the ability to achieve higher standards and adjust to changing conditions by incrementally implementing improvements in ongoing cycles. Continuous improvement requires a structured organizational change management strategy and plan, including implementing rewards systems, engaging stakeholders, and adapting communications to each stakeholder group to ensure that changes are effective and sustained. Just as successful organizations do not evolve randomly, implementing effective governance is a large-scale change initiative that should have a purposeful and adaptive strategy that can anticipate, influence, and respond effectively to organizational needs. Most important, there is not a one-size-fits-all approach to governance. Governance needs to fit the organizational structure, culture, and complexity in order to be effective. The following are characteristics of effective governance and management oversight:

• Defined and integrated governance framework and approach that is aligned with existing organizational structures and organizational strategy and objectives;
• Competent and capable governing bodies that provide timely guidance and oversight;
• Leadership that is adaptable, flexible, and responsive to the changing needs of the organization, portfolio, program, project, and team;
• Visible sponsorship and commitment to provide the necessary organizational support and resources;
• Organizational structures leveraged to support PMOs and other existing governance organizational structures, as needed;
• Portfolio, program, and project managers and teams that are empowered to effectively deliver and remove barriers and obstacles;
• Aligned business strategies and priorities, particularly for multiple competing needs or resource contention;
• Active engagement to monitor and control the delivery of business benefits through program and project delivery;
• Defined and communicated roles and responsibilities, delegated authorities, and quality standards in order to allow accelerated decisions;
• Key performance indicators (KPIs) that are clearly defined and measured to minimize risks and enhance opportunities;
• Processes for proper selection and prioritization of program and project components to meet organizational strategy and operational goals;
• Processes for proper execution by portfolio, program, and project management combined with adherence to policies, standards, and guidelines;
• Tailored communication, knowledge management, training, and reporting;
• Structured organizational change management approach for continuous improvement;
• Engaged stakeholders to develop processes and support change; and
• Adequate funding to develop, maintain, and improve governance.

1.5.2 Governance and Program and Project Complexity

There is a relationship between the required governance resources and processes and the complexity of programs and projects, Navigating Complexity: A Practice Guide [1]¹ defines complexity as a “characteristic of a program or project or its environment which is difficult to manage due to human behavior, system behavior, or ambiguity.” As program and project complexity increases, typically the required governance authority structure, resources, and processes increase as well. Other factors that could impact the governance required are risk appetite, culture, and project management maturity.

In order to balance risk and efficiency, it is important to consider program and project complexity as the governance authority structure, resources, and processes are applied. When there is a lower level of rigor in governance processes or authority structures than required, risk is introduced; on the other hand, when there is an excess level of rigor in governance, inefficiency results, because resources and processes consume valuable time and effort. When implementing governance, keep in mind that it should involve the least amount of authority structure, resources, and processes as possible, because time and costs are associated with governance decision-making and oversight activities. Governance processes should be tailored to the program and project complexity, risks, and other factors. By adopting a flexible and responsive approach to tailoring governance processes, an organization can achieve the optimal level of efficiency. The governance and program and project complexity relationship is depicted in Figure 1-3.

• Scenario A. This scenario indicates that the governance resources and processes are greater than required based on program and project complexity, resulting in inefficient governance. This is due to governance that uses more resources and processes than required, which consumes valuable resources. Governance needs to be tailored to the complexity of the program and project to eliminate bureaucracy but also achieve the proper level of oversight and leadership.
• Scenario B. This scenario indicates that the existing governance resources and processes are less than required based on the program and project complexity resulting in risks to program and project execution and the achievement of strategic goals and objectives. In other words, as the complexity of programs and projects increases, the governance resources and processes should also increase. The gap between existing and optimal resources and processes results in risk. An example of the gap is where an executive sponsor may be spread across multiple programs or projects, thus presenting risk and ineffective governance.

1.6 Governance Domains

This practice guide presents the governance framework by grouping closely related functions into the four domains that uniquely represent governance: governance alignment, governance risk, governance communications, and governance performance (see Figure 1-4). Governance domains are complementary groupings of related functions that uniquely characterize and differentiate the processes or activities found in one governance domain from another. A portfolio, program, or project manager may actively carry out work within multiple governance domains during the portfolio, program, and project life cycles.

These four governance domains are further detailed in Sections 2 through 5, and are described as follows:

• Governance Alignment Domain. Functions and processes to create and maintain an integrated governance framework.
• Governance Risk Domain. Functions and processes to identify and resolve threats and opportunities to ensure balance of risk and reward.

• Governance Performance Domain. Functions and processes to ensure measurement and evaluation of KPIs against parameters and realization of business value.
• Governance Communications Domain. Functions and processes to disseminate information, engage stakeholders, and ensure organizational change.

1.7 Governance Functions

Within each of the four governance domains, there are governance functions that categorize critical processes, activities, and tasks that are performed to provide for an organization's portfolios, programs, and projects.

The four governance functions shown in Figure 1-5 are oversight, control, integration, and decision making, which represent a continuing sequence of processes, activities, and tasks that can occur in any direction and may be repeated throughout the portfolio, program, or project life cycle:

These four governance functions are further detailed in Sections 2 through 5, and are defined as follows:

• Oversight function. The processes and activities that provide guidance, direction, and leadership for portfolios, programs, and projects.
• Control function. The processes and activities that provide monitoring, measuring, and reporting for portfolios, programs, and projects.
• Integration function. The processes and activities that provide strategic alignment for portfolios, programs, and projects.
• Decision-making function. The processes and activities that provide structure and delegations of authority for portfolios, programs, and projects.

1.8 Governance Framework Implementation

In order to improve an existing or implement a new governance framework to support an organization's portfolios, programs, or projects, this guide describes a four-step method that should be followed: Assess, Plan, Implement, and Improve. These steps may be overlapping and iterative, and may be performed multiple times throughout the framework implementation. The implementation should be tailored to the culture of the organization; the types of portfolios, programs, and projects managed; and the needs of the organization to meet strategic objectives. All of the activities and deliverables described in this practice guide may not apply to all organizations, and there may be other activities and deliverables required based on the organizational context. Each organization should consider the specific governance framework that would be the most appropriate to implement and tailor it accordingly. Additional tailoring considerations are described in Section 2.3.1.

Figure 1-6 represents the high-level governance framework implementation four-step method that is further detailed in Sections 2 through 5 and in Annex A1.

The four steps to implement a governance framework are:

• Assess. The purpose of the assess step is to review and analyze the current state of governance in the organizational context and current versus desired portfolio, program, and project governance practices. Performing assessments and analysis will assist the organization; portfolio, program, and project managers; and sponsors in developing a consistent vision and method for the future state of governance for portfolios, programs, and projects.
• Plan. The purpose of the plan step is to plan for the desired future state governance in order to establish the governance organizational structure, roles, responsibilities, and authorities; governance-related processes; and required interactions.
• Implement. The purpose of the implement step is to operationalize the governance framework, functions, and processes; manage organizational change; complete various governance reviews; and measure governance performance.
• Improve. The purpose of the improve step is to assess performance and define improvement opportunities.

This practice guide details the four-step governance framework implementation, focusing on two different scenarios or applications.

• In Section 2, the governance of organizational project management (OPM) is implemented as a separate project. This approach is applicable because the focus of OPM governance is to integrate portfolio, program, and project management practices across the organization.
• In Sections 3 through 5, governance at the portfolio, program, and project levels utilizes the framework implementation within the portfolio management process cycle, the program life cycle, and project life cycle, respectively, to provide guidance to practitioners. Portfolio, program, and project managers and sponsors should understand the existing governance framework and ensure that the appropriate framework is in place for all portfolios, programs, and projects.

Annex A1 describes in detail the portfolio, program, and project governance framework implementation steps.

¹ The numbers in brackets refer to the list of references at the end of this practice guide.