We can probably all recall an Employer (client) who at some time or other approached the delicate balance of delegating authority to Project Managers with either too much suffocating governance or not enough control to limit their risk exposure. Perhaps you’re currently struggling with achieving this balance?
Our previous blog - http://www.cemar.co.uk/blog/2014/11/19/nec3-the-3-golden-rules-of-engagement - highlighted the importance of empowering individuals to make decisions.
This is so important with NEC3 contracts as the benefit of its timely processes can only be realised by allowing experienced professionals the autonomy to administer the contract and progress events and matters which affect cost, time and quality. There is nothing more disheartening than being entrusted with an exciting, complex and dynamic project only to be faced with constant governance controls which suffocate efficient, economical and collaborative decision making.
So how can a client properly delegate authority but maintain visibility on their potential financial exposure?
The answer lies in systems of governance and reporting that allow an insight into what is happening at both a project level and across a programme, or entire portfolio. Maintaining aggregate data allows analysis to support governance models that doesn’t just impose “gut feel” processes potentially rooted in a fear of people getting things wrong!
A common governance approach is to set financial thresholds for project managers allowing them to work autonomously within a known cost range and a set parameter of the original contract price. This can have the benefit of empowering individuals whilst bringing the most financially significant events back to a central governance board for approval whilst restricting spends beyond certain predefined limits.
So if I’m a client organisation and I’ve set my financial thresholds and put in place governance procedures for managing them – how do I know if they are right?
This question feels like a fairly subjective matter however there are metrics that we can record and analyse which will give an objective view of what the governance process is controlling and whether it’s efficient and economical. This is where reporting can become extremely powerful in intelligently interrogating the financial thresholds set and the quantum of change events within certain ranges.
Governance should be aligned to what the data is objectively indicating, not on anecdotal hearsay. In order to do this clients should be implementing systems which can answer the following types of questions -
- What % of the total number of events falls within the financial thresholds I’ve set? – i.e. what proportion of events am I entrusting to the Project Manager or those with delegated authority?
- This ‘shape of change’ will also indicate the workload experienced by those having to manage events which surpass certain thresholds.
- What % of the total aggregate value of all change events is within the financial thresholds I’ve set?
- i.e. how much of the entire cost of change is being managed by those with delegated authority?
- What is the typical difference and trend between Project Manager estimates of change, the Contractor’s quotations and the final implemented change to the Prices?
If it emerges that 85% of the entire value of change is only in 10% of the total number of events, then wouldn’t it make sense to adjust governance accordingly? Wouldn’t you want to focus the senior commercial team on those 10% of events - safe in the knowledge that Project Managers on the front line are only exposed to 15% of the total change budget, yet progressing with the volume?
Would confidence in the decision to do so be enhanced if you could empirically evidence the difference between quotations and implemented values was minimal, or otherwise? Thus further mitigating the potential for error across the 15% and allocating resources appropriately.
For client organisations to really empower individuals, whilst managing risk with visibility of their financial exposure, these sorts of questions are a good place to start. You might be surprised at the answers and how they help you target limited resources to best effect!
CEMAR can provide not only the automated and dynamic governance required to manage these issues but it can also analyse and report on your data to answer those fundamental questions. This objective analysis provides a readymade business case to auditors and stakeholders.
We go beyond time, cost and quality metrics, to look deep into behaviours and their implications for governance and portfolio level risk.
Contact us for a demonstration - http://www.cemar.co.uk/getintouch/
And take a look at how CEMAR is evolving in 2015 with even greater reporting power and business intelligence through CEMAR Analytics -