Without Clear Governance, Your Transformation Is at Risk
According to a 2024 BCG report, nearly 70% of transformations fail to meet their objectives.
In an earlier article, I made the case for a Program Management Office (PMO) to help secure the execution of a business transformation. In the present article, I want to take a step back and look at governance of the overall transformation on top of that of the PMO.
Have you ever looked into a business transformation and seen:
Too many sponsors
Steering committees that only listen
A PMO staffed with junior profiles
No consequences for missing targets?
Any of these are symptoms of poor governance.
Over the years, working on profitability programs, post-merger integrations, restructurings, and operational turnarounds, I’ve seen that successful transformations all have clear governance. Although it’s not a sufficient condition for success, it is a necessary one.
In my experience, a clear governance for a business transformation answers three questions:
Who owns the outcome?
Who decides when trade-offs are needed?
How is the PMO run to secure business benefits delivery?
The Three Governance Layers of Transformations
Transformations usually end up relying on three governance layers, each corresponding to one of the three questions above.
The sponsor
The sponsor owns the outcome. It is usually the CEO, although it can sometimes be the CFO (especially in profitability improvement programs), or a Business Unit head for a divisional program.
The sponsor sets the ambition, ensures that enough resources are available, arbitrates conflicts, and signals that the transformation is non-optional.
The most important rule for the sponsor is that it must be one person only.
The steering committee
The steering committee decides when trade-offs are needed. It is a decision body, not a reporting unit. Therefore, it should not include observers or people without decision rights. Its composition should reflect the areas impacted, typically:
The sponsor
The CFO
Relevant Business Unit heads
COO / CIO, depending on scope
The PMO lead
In the first 3–6 months of a transformation execution, steering meetings should take place weekly or fortnightly. Monthly is too slow, because by the time issues surface, momentum is already lost.
An effective steering committee:
Takes decisions to remediate execution issues (that could not be remediated by the PMO), especially cross-functional issues
Reallocates resources among the program initiatives (if needed)
Stops initiatives that underperform or become irrelevant.
Steering committees must maintain the transformation momentum by taking decisions, not reviewing slides.
The PMO: the operating system for business benefits delivery
A PMO does three things.
Provide transparency on progress. The PMO provides visibility over the transformation by tracking initiative progress, monitoring the realization of business benefits, updating forecasts, and preparing reports for the steering committee meetings. This is not about collecting information from the various initiative leaders, but about challenging them and extracting a clear picture of the actual status of the various initiatives’ progress.
Manage risks and remediate issues. The PMO actively identifies cross-workstream risks, addresses issues with initiative leaders, and escalates when necessary.
Communicate. By regularly informing stakeholders about progress and challenges, the PMO sustains alignment, reinforces accountability, and maintains momentum across the organization.
Let’s look at two “stories from the field” to see how some governance levers help make a PMO effective.
Choosing the right PMO leader
A few years ago, I worked on a transformation for a pharma logistics company. The ambition was significant: reduce the cost base by ~10%. The transformation covered multiple countries and functions and had high interdependencies.
Once the program was defined, consultants set up the PMO, and it was agreed that the PMO would be progressively transitioned to an internal team. The CEO made a decisive governance decision: he appointed the Head of Controlling to lead the PMO. This person was experienced, highly competent, and well regarded in the company. After a 2–3 month transition period during which consultants and the internal team worked side by side, the Head of Controlling took full ownership.
That decision set the tone of the transformation: the financial impact of the various initiatives would be reviewed rigorously. The message was clear: this was not a theoretical program. It was a financial commitment.
Aligning incentives to the transformation's goals
Governance is not only about structure; it is also about incentives.
In a bank merger, I was leading a team in charge of restructuring several thousand Over-The-Counter (OTC) derivative transactions on interest rate swaps across ~20 counterparties.
This was technically complex, high stakes, and subject to a strict deadline. To succeed required the collaboration of traders, for whom restructuring the OTC transactions was seen as secondary to revenue-generating trading activities. Their bonuses were tied to trading P&L, not to transaction restructuring.
The traders’ limited initial engagement was slowing things down, so I suggested to the sponsor that the traders’ bonuses be linked to the restructuring efforts. Although I did not receive a firm agreement from the sponsor, I was told that “it would be taken care of.” Engagement changed almost immediately. Traders became active contributors and eventually helped the program exceed its target.
Most of the time, people are rational. Behavior follows incentives. If transformation performance does not affect compensation, it will usually not affect priorities.
The 4 governance levers of an effective PMO
If you are in charge of setting up the governance of a PMO, focus on four levers.
Lever 1: PMO leadership
The PMO leader must be able to challenge business heads (to get an accurate picture of the progress of their initiatives), be financially literate, credible internally, and able to lead the steering committee meetings.
This calls for a senior profile who can lean on experience. A junior profile rarely works.
Lever 2: Steering cadence and decision rights
Steering committee meetings should take place weekly or fortnightly during the first 3–6 months of execution, with a possible revision after that.
Additionally, clear escalation paths and decision rights must be in place, ideally in writing for clarity.
Lever 3: Financial validation discipline
Every initiative must have a clear baseline and quantify its expected impact (these should be established before the PMO is set-up, see my earlier article).
The progressive realization of business benefits must be tracked for each steering committee meeting and validated by Finance.
Lever 4: Incentive alignment
Review variable compensation of key contributors by linking a meaningful portion to transformation KPIs and by making contribution to the transformation visible in promotion decisions.
Governance Is a Leadership Signal
Governance is sometimes perceived as administrative overhead, but it is really a leadership signal.
When the CEO or the CFO is the sponsor of a transformation and ultimately responsible for its outcome, the organization understands this is serious.
When several C-level executives invest time every week or fortnight in a steering meeting, it shows commitment at the highest level of the company.
When a CEO appoints the Head of Controlling to run the PMO, or when trader bonuses depend on transformation KPIs, priorities shift immediately.
If you are launching a transformation, ask yourself:
Is there a unique sponsor?
Is there a steering committee and cadence in place to take decisions quickly?
Is the PMO led by the right person?
Is financial impact tracked and validated by Finance?
Do incentives align with the transformation’s goals?
If not, you transformation is at risk before it even starts.