TIØ5210: Programme and Portfolio Management
Definition and background
What is governance
Good and transparent management of firms and institutions.
External management, not internal.
Why it is needed
Avoiding scandals like Enron, Worldcom, bank crisis
Changes in laws and regulations like Sarbanes-Oxley (US) and the Higgs report (UK).
Establishing the framework and boundaries for good and transparent management
Neo-liberalism: Humans are not steered directly but through the norms and other subtle forces in society
Governance includes laws, guidelines and frameworks that shape, but not determine directly, conditions for ordered rule and collective action)
Making people responsible for their conduct. (Freedom and responsiblity).
What is the relationship between governance and management?
If the Boards of Directors of a company tries to interfere directly into the management of a project, what have they misunderstood about their roles and responsibilities, as seen from a Governance point of view?
Governance should regulate how we develop and use methods and processes that shape:
- Defining objectives: The strategic focus
- Choosing the appropriate means: Acquiring, utilizing and maintaining resources through plans, budgets etc.
- Controlling performance: Supervision of appropriate use of resources, value creation processes and impact on environment
- Governments, public agencies, etc.
- Board of directors, auditors, etc.
- Sponsors, steering groups, etc.
- Program and Portfolio managers
- Project Management Office
- Line managers
- Standards, guidelines, etc.
- What should a governing body do if they don’t like the contents of project’s objectives?
- How and to what extent is the governing body responsible if the project is not capable of producing the intended result?
Main theoretical components
- Actors: Act within the system, complying or counter-acting. Both the regulator and the regulated are parts of the same system.
- Institutions: Structures, frames, policies, regulations, roles and responsibilities that shape the actor’s context.
- Principal-agent approach
- Possible conflicts of interests
- Imperfect control
- Realigning the agent’s interests with the principal’s
- The contract as the primary governance mechanism
- Minimize transaction costs
- Make-or-buy decisions
- To what extent can and should actors and institutions be independent of each other?
- To what extent should the Governance approach be the same for all projects or tailor-made to each project?