To be effective, every leader needs to have an understanding of different types of compliance. Compliance is important because organizations and projects need to conform to internal and external rules governing a project. In the PMP Exam context, compliance is part of the business environment domain. If you work in an industry where compliance impacts your work or you just want more information on types of compliance and their benefits, read on.
Compliance in Project Management
Types and Examples of Compliance
As a project leader you are responsible for managing compliance for your projects. One way to do this is to create compliance categories to organize and manage project compliance. We typically look at four compliance categories: Mandatory, Discretionary, Internal, and External. Let’s take a closer look at each category.
Compliance can be external. For example, the applicable laws, rules and regulations imposed by federal, state and local governments need compliance. Failure to do so can result in civil and/or criminal liability for the organization and even personal liability for the project manager. Needless to say, failure to comply with such rules could also result in the complete failure of the project.
Environmental regulations are one example of an external rule that must be complied with. If you are running a project for the construction of a bridge and the plan calls for the filling of wetlands, you will have to get the necessary permits before you can start work. If you start, before obtaining those permits, it is likely that your project will be stopped cold and significant fines and other penalties will be imposed on your company.
There may also be internal rules that need compliance. An example of internal rules would be company rules around procurement of outside resources. The company might require you to follow a bidding or proposal process.
If you fail to do so, and hand a contract off to a school friend, you may not find yourself facing criminal liability, but you certainly would have a very good chance suffering consequences from within the company.
There are compliance requirements that must be conformed to that are absolute. The example of the fill permit described above is one of example. There are all sorts of these requirements. Some are obvious in the project context, some are not.
It is the non-obvious ones that you need to watch out for.
A simple example is that as a project manager, you can’t take company equipment and convert it for you own use. That is theft and is fairly obvious. A less obvious violation would be where a project manager takes resources from one project and uses them for another. This could be a violation of internal rules governing project budgeting. It also could be a violation of external regulations imposed on a firm by a granting agency. If the firm doing the project is the recipient of a grant they may be required to account to a state or federal agency for the use of grant money.
Discretionary compliance requirements are those that might be considered best practices. Failure to conform to these requirements will not necessarily result in liability of civil or criminal consequences. An example of a discretionary compliance requirement would be guidelines. A guideline might represent a best practice that saves time and money within a particular business environment and the failure to follow that guideline might result in the project being delayed, coming in above budget or could result in project failure.
There are numerous situations where project managers are criticized or even fired for failing to follow corporate guidelines for project performance. An example of this would be where a company has a guideline for preparation of a risk management plan and an identified best practice for creating that plan. If that guideline is not followed by the project manager certain risks might not being identified. The failure to follow the guideline will not result in civil or criminal liability but there could be adverse consequences for the project and/or the project manager.
Benefits of Compliance on Projects
Compliance touches on a broad range of project management processes. As seen above, compliance can deal with preparing the risk management plan. It’s also obvious that compliance has the potential of impacting communication management, stakeholder engagement and scope.
Indeed, because compliance issues define the business and project environment, they have the potential of impacting every aspect of the project in some way. For this reason, compliance must be managed as part of the project.
To learn more about compliance, check out RMC’s free recorded webinar entitled Focus on Compliance: Expand Your Awareness and Improve Project Success.