How business orientation shapes IT governance

Enterprises vary in how they compete and how they are organized. Their business governance gives the context for IT governance

It’s been nine months since we introduced the IT governance framework that combines three components: what decisions need to be made, who makes them, and how they are enacted. But our Gartner Executive Program CIO members wanted to understand more about what their IT governance should look like, depending on different ways in which their enterprise was organized.

For example, if an enterprise was highly centralized, what did this mean for decision rights and accountabilities about IT? If you have a strong history of autonomous business units how can you set up the accountabilities for the ERP system you are initiating? (The answer to that one is either ‘very carefully’, or perhaps you shouldn’t be doing it at all.)

Three business orientations

The EXP research team worked again with MIT Sloan School’s Peter Weill to further investigate how business governance shapes – or should shape – IT governance.

CIOs need to use IT governance styles and mechanisms that are most appropriate to their enterprise orientation. Decisions and accountabilities around IT should always be made through the joint efforts of business and IT executives. But there are some things that are more important in each of the different orientations.

We found that three business orientations – synergistic, agile and autonomous – shape different business governance arrangements. CIOs need to use IT governance styles and mechanisms that are most appropriate for each orientation.

Synergistic enterprises. Effective synergistic enterprises have clear decision processes, executive input, and IT-business unit relationship managers. Such enterprises face strong pressures for firm-wide integration from their marketplaces and leverage the similarities across their business units through enterprise-wide leadership. They also mandate standards, especially in IT infrastructure components, such as desktops, e-mail, IT security, enterprise resource planning and other enterprise-wide applications.

Agile enterprises. Enterprises striving for agility aim for faster decision-making and action than their competitors. They make greater use of principles, education and communication. Their business governance and IT governance styles and mechanisms need to enable fast decision-making and execution.

Agile enterprises tend to foster strong business ownership of IT projects.

Executives need to know more about IT in agile enterprises, as it is usually integral to their products, processes and services. To foster agility, corporate executives need ‘lines of sight’ between enterprise goals and performance metrics. The same is true for IT. For example, the Italian headquartered firm Pirelli lays out its business maxims to include ‘be an innovation frontrunner’ and ‘Increase speed, go faster’. These are overtly matched by desirable IT behaviors that include ‘use IT to help deliver new business models’ and ‘use the Internet as a market weapon’.

Autonomous enterprises. These enterprises use one-on-one negotiation and peer socialization. Enterprises that foster business-unit autonomy provide little central guidance. Their goal is to untether units so that they can compete most effectively in their local markets. Some processes or standards may be mandated, mainly those for business and IT infrastructure. IT governance must reflect that autonomous decision-making, with a focus on the front lines, not the corporate center. Standards – where they exist – are achieved through socialization and peer pressure. In the words of the CIO of a European auto parts company we worked with: “When you have 100 plants that have implemented a standard on time, it’s hard for the others to convince anyone why they can’t do the same”. Business unit performance metrics are published regularly.

Top performers use IT governance styles appropriate to their business orientation. However, there are two caveats to linking IT governance to business orientation. First, enterprises that have more autonomous business orientations sometimes mandate to achieve greater synergies in specific areas. Groups such as finance, human resources and IT are expected to provide common infrastructures. Second, many mechanisms are necessary in every situation. For example, councils or committees that allow for joint business-IT decision-making are always necessary. What differs for the three business orientations is the membership of committees, the way they are used, where they are located in the enterprise and the extent and nature of their responsibilities.

Use your business orientation context to really weave business and IT governance into a coherent and consistent set of input and decision rights and accountabilities.

Dr Marianne Broadbent is Group Vice President and Gartner Fellow, Gartner’s CIO Executive Programs.

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