How does Organizational Culture affect your Projects?

Does this sound familiar?

I recently got a question on LinkedIn requesting my input which in turn inspired today’s post.  The question was to clarify the impact of organizational culture on projects. Well my take on this question is twofold: organizational culture can have negative and positive impact on projects.  In Nigeria, our organizations grapple with getting competent staff to execute projects, managing impossible timelines and limited resources, and often unpredictable financial cash flows. Despite these constraints, the PM is expected to deliver on their projects without considering their impact on project performance.

Often times we focus on the impact of external factors like clients and customers on our projects that we tend to forget that the internal idiosyncrasies in the organizations we work for also pose significant impacts in project delivery.  What constitutes our organizational culture include our processes, values, technology, people, and strategic objectives. Organizational culture is as a result of how your people interact with all these parts in the work place environment. It affects the way people and groups interact with each other, with clients and stakeholders.

While organizations have a holistic unique culture, however sub cultures can exist between groups or people under the same organization.  Like stated earlier, organizational cultures can be positive or negative.

A few characteristics of positive cultures include:

• Strong and accountable leadership
•  Structured and transparent decision making
• Employee satisfaction and pride
• Enviable team spirit
• Investment in employee welfare and professional development
• Low employee turnover
• Strong competitive edge/advantage
• Hands on management

On the other hand, a few characteristics of negative cultures:

• Poor organizational/employee performance
• High employee turn over
• Lack of concern for employee welfare and professional development
• Weak leadership
• Lack of innovation and employee empowerment

Regarding project implementation, organizational culture is reflected in the way people perform tasks, set objectives, and administer the necessary resources to achieve objectives. Culture affects the way individuals make decisions, resolve issues and conflicts, and act in response to the opportunities and threats affecting the organization.

An organization that embodies a healthy, positive culture will have the following impact on projects:

• Well planned resource allocation
• High project performance regarding budget, schedule and scope
• Proper risk management
• High employee morale 
•  Reduced probability of waste, rework and scrap
• Effective project management methodologies and practice
• Empowered and highly motivated team

Negative cultures will have the following impact:

• Over run budgets and schedules
• Missed timelines and milestone targets
• Poor quality deliverables due to rework, employee turnover, and waste
• Customer dissatisfaction
• Difficult to motivate and manage teams

These lists are by no means exhaustive. Are there any positive and negative impacts you can think of?

The Role of Project Governance in Project Success

Project governance involves the sum of activities that ensure that the RIGHT projects are executed RIGHTLY according to laid down processes and procedures.  Emphasis on RIGHT projects means that governance facilitates the decision making process of project selection before they are executed.  This organizational body helps to put a structure for managing projects from initiation to closure in compliance with organizational regulatory framework and PM methodology.  Organizations can adopt PM methodology that fits its structure, governance ensures a synergy and correlation exists between organizational policies and PM policies. 

The main functions of project governance are to:

• Clarify responsibilities and accountability of resources within a project team
• Provide guidelines for selecting and initiating projects
• Facilitate decision making and issue resolution
• Provide access to best practices and expert advice

According to an article “Linking PMI Standards to Project Governance,” the primary focus of effective project governance is the elimination of failures. An effective governance system should be proactive and preventive. Through close monitoring of project reports, business cases, and risk logs, root causes of project failures can be discovered and reduced or eliminated. Even though the field of project management has evolved and matured over the years to refined methodologies and practices, yet projects continue to fail at an alarming rate.  Michael Krigsman estimates that the rate of failure of IT projects to be 60-80%.  For the percentage that succeed, effective project governance is listed as one the key factors. No matter how refined your PM methodology is, without strong leadership commitment towards governance, your chances of success are limited.

If there are issues indicated by a project manager on an issue/risk log that has been pending for weeks, a trigger needs to set off via the project manager and Governance Board/ Steering Committee to facilitate immediate resolution of the issue.  When there are patterns or trends in decision making on projects that are yielding negative outcomes like delays in project, scope creep, poor delivery performance, the governance board evaluates these incidents and puts in place mechanisms to reduce their occurrence.

An effective governance structure should not wait until there are dire consequences from poor decision making on projects before setting up a framework to empower project managers and their teams to make enlightened decisions. A project manager should be able to make informed decision when a critical path activity suddenly moves from a green to amber or red status. Equally, project governance should be able to provide the project manager with necessary tools, expert advice and resources needed to execute the decisions.

The Role of Project Governance

Another useful importance of project governance is ensuring compliance to external regulatory framework. When executing projects in the public sector, there are requirements regarding procurement, financial accounting, recruitment of staff, and disclosure of performance information that need to be complied with.  In UK for example, federal projects are subject to audits by the OGC gateway process.  In the US, there are regulations that require the exclusive use of US citizens for specific projects. By closely monitoring compliance to these requirements, project governance helps to prevent the project from exposing the organization to possible legal proceedings or project termination.

One of the components of governance system is project management effectiveness and efficiency.  This ensures that project teams are aware of their expectations in the project and are capable of delivering the benefits and objectives of the project.  Part of this mandate involves hiring the right people for the job, equipping them with right tools and methodologies, monitoring their progress and performance while also resolving any conflicts or issues that may arise. 

Governance helps to align project goals with organizational goals and strategies. A 2005 survey of project management office (PMO) leaders by Business Improvement Architects found that 87% of organizations “do not align projects strategically with corporate strategy.”[1] Hence, project governance plays a significant role during the process of documenting and updating the business case for a project.  Before the project is selected, there needs to be justification on how the project will be beneficial to the organization as well as how to ensure the project meets the intended goals during implementation. This template will serve as a guide during project review process to ensure compliance and resolve any issues that may affect the efficiency and effectiveness of the project.

The project business case also provides a reliable basis for making authorizations and decisions. Such decisions can involve halting a project mid phase or outright termination when the outcomes are not aligned with organizational goals.  During this stage, a review of the project is initiated with emphasis on identifying root causes and justification to proceed or not with the project.  Maintaining this proactive approach ensures that projects that do not add value are avoided and further waste of resources reduced.

Having the authoritative and exclusive support of a Governance board/Steering committee shows executive good will towards the success of the project.  According to Governance of Project Management (GoPM), the board has overall responsibility for governance of project management[2].  The Governance board has a sponsor whose role is to mediate between the project team and executive management. He/She has authority on decision making and can commit resources as needed to drive the project to success. Sponsors ensure that projects realize benefits and prevent them from getting out of control.  It is imperative that project sponsors have accountability and devote time to effective governance to reduce the probability of failure.

The key to successful projects is the perfect juxtaposition of the role of an effective governance system aligned with organizational strategy and supported by an active board/steering committee.  Organizations that manage projects can benefit from implementing governance system to yield results like high level of project success to financial benefits like positive ROI.

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[1] KPMG Project Management Surveys – 2002, 2003, 2004 accessed at www.mosaicprojects.com.au/Resources_papers.html#Proj.off

[2] APM (2004) Directing Change – A guide to the Governance of Project Management. The Association of Project Management, High Wycombe, UK