Six Characteristics of Effective Governance

Last month’s column argued that effective IT governance means making thoughtful decisions about the three major components of governance.

First, five IT domains (1. IT principles or maxims; 2. infrastructure strategies; 3. IT architecture; 4. business applications needs; 5. IT investment and prioritization) are areas where critical top-level decisions need to be made between business and IT executives.

Second, IT governance styles define who provides input and who makes decisions in the IT domains.

Third, IT governance mechanisms are techniques used to implement the IT governance style.

The joint research on IT governance between MIT Sloan and Gartner’s CIO group, Executive Programs, identified the differences between organizations with good IT governance and those with poor IT governance.

In those organizations found to have good IT governance, the key is tightly coupled business and technology executive decision-making. Top IT governance performers have senior business and technology executives take responsibility for IT principles or maxims, which are derived from business maxims. Plus they also take responsibility for major IT investment and prioritization.

The IT leadership team is critical for infrastructure and architecture decisions. Once IT principles and investment guidelines are well established these provide the guide-rails for IT infrastructure strategy decisions. These are generally made by IT leadership groups, but to be effective they require considerable input from business colleagues.

Successful mechanisms

The mechanisms used to implement governance vary in their effectiveness. The most effective enhance business involvement. They use business/IT relationship managers, IT leadership groups comprising IT executives across the enterprise, IT councils comprising business and IT executives, and executive committees. These are the first mechanisms to work on to improve IT-governance performance.

Six characteristics were prevalent in the enterprises that scored high on effective governance.

Characteristic 1– strongly differentiated business strategies

Higher IT governance performance goes hand-in-hand with strongly differentiated business strategies.

Each enterprise in the survey rated the importance of the three value disciplines – customer intimacy, product/service innovation, and operational excellence – on their future business strategy and operations. Those that thought everything was important also scored low on effective IT governance.

Designing effective governance for operational excellence requires focusing on specific objectives, such as reduced transaction costs to customers, greater supply-chain efficiencies or automating business processes.

Characteristic 2– clear business objectives for IT investments

Enterprises that focus on specific objectives for their IT investments, such as improving product quality, reducing time-to-market or improving employee collaboration, also have significantly more effective IT governance. By putting their energies into fewer, more important areas, they have a better chance of delivering.

Characteristic 3– high-level executive participation in IT governance

Good IT governance engages executives. Enterprises that have higher IT- governance performance scores also have heavy senior-executive involvement. The more senior, the greater the impact. And the more informed business executives are about IT governance, the more effectively it works.

Characteristic 4– stable IT governance, with few changes year-to-year

Stability in governance processes proved to be important. Too many changes make it harder for business executives to understand how IT governance operates. If they don’t understand it, it doesn’t work as well. The top third of governance performers made only one change per year while the bottom third made three changes.

Characteristic 5– well-functioning, formal exception processes

Exception handling is another indicator of effective IT governance. Exception-handling processes function better in enterprises with higher governance performance. They are viewed as more transparent and fair, which results in fewer non-sanctioned exceptions.

Characteristic 6– formal communication methods

High IT governance performers have formal communication methods and mechanisms. These reinforce the fact that IT governance really matters to both business and technology executives.

Effective IT governance helps enterprises deal with complexity. It’s about making sure the right people have responsibility for key decisions and that there is a lot of input from others. IT governance that is thoughtful and transparent fosters trust. And trust in turn will give CIOs much greater ‘degrees of freedom’ and build their credibility bank.

Dr. Marianne Broadbent is Group Vice President and Global Head of Research for Gartner’s Executive Programs.