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Inside the Sarbox: The Future of Project Management

  • September 4, 2003
  • By Jeannette Cabanis-Brewin
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Naturalist John Muir once said, "Tug on anything in Nature, and you find it is connected to everything else." The same is true of business. A few years ago, in a column for my online newsletter, the Best Practices e-Advisor, I commented that all hot concepts in project management seemed to be running together in a blur (see The Enterprise Project Office Maturity Modeling Portfolio—and Other Adventures in Holistic Project Management). The trend continues; in fact, with the passage of the Sarbanes-Oxley Act of 2002, the pace at which formerly disparate parts of the organization must integrate has picked up.

In plain English, Sarbanes-Oxley (affectionately nicknamed "Sarbox" ... not to be confused with Pandora's Box) means that CEOs and financial officers of publicly traded organizations can no longer say, "Gee, I didn't know that." Post-Sarbox, "Somebody in one of those distant functional silos must have screwed up," will be no excuse when the chickens come home to roost. The "chickens"—Risky Projects, Accounting Irregularities, and Shady Deals, by name—and the contents of the "silos" are now the personal responsibilities of the top brass, with severe penalties (up to $5 million and/or 20 years in jail) for willful cluelessness.

Breaking Down Barriers

Project managers have been complaining for years that top executives weren't paying attention to the needs and realities of projects. Thanks to Sarbox, that will change. Project managers will have all the executive attention they can stand ... and then some. It's a classic case of getting what you wished for.

In a recent interview, project management expert Greg Hutchins, PMP, noted that this is "a huge, huge opportunity and challenge for project managers.... What this does is effectively erase many of the barriers between project management and finance, and between projects and the highest decision-making levels of the corporation. Project managers need to be well along on the maturity curve to handle this. A mature project manager can say what the 15 or 20 items are that might be problematic out of 2,000 items in a work breakdown structure. Those 'project breakers' transcend cost and schedule issues; they are big issues, issues that project managers once thought were outside their scope—such as regulatory compliance, the environment, internal politics, and market timing."

From this comment, it's obvious that more than finance and project management are forced into cozier integration by the new rules. The way the enterprise assesses and manages risks will also become a central issue for the people who have to certify that they have not done anything "fancy" with shareholders' money. Although Sarbox doesn't specifically mention better risk management, you can bet that anxious audit committees, CEOs, and CFOs will be reading between the lines. According to an article in the April 2003 issue of Risk and Insurance magazine, one of the most important implications of Sarbox is a bias in favor of "risk transparency." The act obligates companies not only to openly share information about known risks, but also sets up the expectation that they will have a rigorous process in place for discovering unknown risks. According to Hutchins, "risk processes throughout the enterprise are going to be under great scrutiny by regulators and by executive leadership, forging a link between the project level and the board level that has not existed before."

Sarbox, Risk, and Portfolio Management

How can an enterprise adequately manage risks without knowing exactly what is going on? The strong pressure for project portfolio management inherent in the Sarbox rules changes has only begun to be felt. Writing in a recent issue of IT Management Online, George Spafford points out that project management can only ensure that projects meet expectations and create value if the best projects are selected and approved in the first place. Hutchins agrees, calling portfolio management "a step in the right direction, as it deals with consistent processes, hopefully flowcharted, with risk points identified and controls identified." But, he notes that portfolio management is still a practice under development, not a mature practice in most organizations.

It's hard to implement portfolio management in the absence of sound project management methodology, project knowledge management, and infrastructure—including enterprise project management systems and an organizational "home" to oversee project management processes, such as an enterprise-level project office. Implementing an enterprise project office brings up the issues of organizational maturity and personal competence. It's a puzzling chicken-and-egg question: Can an organization achieve a high level of maturity in sophisticated project management practices such as portfolio and risk management without an enterprise project office in place? Can it create such an office effectively without a high level of maturity? The answer probably lies in the personal competence of project managers who are motivated to make a difference in their organizations.

Open the Sarbox and tug on one enterprise issue and you'll find they are all connected to each other. This is important and pressing news for project managers. The integrative skills that are the souls of project management have never been more needed by organizations; the pressure to perform them effectively never more intense.

About the Author

Jeannette Cabanis-Brewin (jcabanis-brewin@pmsolutions.com) writes on the organizational and human side of project management for the Center for Business Practices, the publishing and research division of Project Management Solutions, Inc. A former staff writer and editor for PMI's PM Network magazine, her feature articles have been widely reprinted and quoted in project management publications in the U.K., South Africa, and Australia. Recently, her articles on project management topics have appeared in Projects@Work, Primavera magazine, myplanview.com, People On Projects, and the Best Practices e-Advisor. She is the editor of several award-winning project management books, and author/co-author of two books forthcoming from Marcel Dekker/Center for Business Practices.




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