BEST PRACTICE 4

57 percent of CIOs say: Use a steering committee to guide IT investment

Call for Backup How a cross-functional steering committee can make better spending decisions

IT steering committees have become more widespread as the importance of IT has grown. Steering committees let CIOs share the responsibilities - and the risks - of aligning IT with the business. If you hate being the person who always says: No - the IS steering group can do it for you.

As one CIO we spoke with observed: "If I had to interact with each proponent [of a project] and say, IT doesn't think your idea is worth what someone else's is, I would be miserable and so would my staff." Instead, four board member meet biweekly with the heads of major departments within this CIO's organization to set IT investment priorities. Every proposal - whether it's for a brand-new system, an upgrade or maintenance - needs the steering committee's stamp of approval before it gets funding. And no project gets on the steering committee's agenda unless it's presented with a well-developed business case.

When a committee of top executives makes technology investment decisions, "there's a lot more clarity" about the contribution IT makes to the organization, said another CIO. "I think it allows our IT organization to focus on more effective execution and less on having to sell things to the business."

75 percent CIOs in "The State of the CIO 2004" survey said they have a high-level group that governs IT investment decisions and 57 percent indicated that this practice makes CIOs highly effective in their jobs. Those who get the most out of their steering committees follow a few basic rules.

Get Strategic CIOs who want to form steering committees or improve their existing committees' decision-making processes should start by making sure their CEOs agree that IT has strategic importance to their companies. Our best practices CIOs said you need to explain to CEOs that if they are going to be spending significant dollars on technology, you need some type of structure that can help them sort through the priorities. Once that principle is accepted, the next step is to give the company's top managers a say in how the technology budget is spent.

Tap Top Decision-Makers Some organizations involve only members of the executive committee in IT decision-making, others include business unit heads. However our best practices CIOs agreed that a general rule of thumb was to: Keep the group small enough to be able to make decisions, but make sure important business interests are accounted for. When key managers participate in an IT investment decision, the CIOs said, the outcome is a prioritized project list, along with resources to back it up.

"I would have the head of our services group saying he needs project accounting today, and sales saying we need a CRM system," the CIO said. "They're both valid requests. How do I prioritize those?" His high-level group, which also includes the company president, CFO, CIO, chief accounting officer and the heads of two business units, decides which projects should move quickest. For example, the purchasing department might have a system that's working well enough to put off an upgrade, but the project accounting system has to be fixed right away to accommodate plans to take on more clients.

Meet Frequently At one top CIO's organization, a subgroup of the technology steering committee called the IT Application Prioritization Review meets twice a month to go over new proposals, passing on to the full committee those ideas that members think should go forward. Frequent meetings ensure that IT spending stays aligned with business strategy by providing a means for project proponents to get feedback.

Another CIO pointed out that any time his steering committee rejects a proposal he thinks has merit, he can refine his argument and pitch it again in a month. To win approval for a recent upgrade to his company's human resources management system, the CIO used the time between meetings to talk up the project in one-on-one conversations with steering committee members, then brought the HR director to the full group to help make the case. The two of them presented the argument that the existing system couldn't support the additional users that would be accessing it as the company hired new people to advance its growth strategy. The CIO's case carried the day.

Establish Clear Standards and Steps for Project Approval Build senior management approval into your development methodology for major projects, our best practices CIOs said. Start with ideas generated within the company's business units and use teams of IT and business process experts to analyze corporatewide system requirements and design a prototype. In the design phase, spell out the business value for the project and investigate whether it can be scaled up for use by the entire enterprise. Executives take special interest in projects business units can share.

If you establish clear standards and steps for project approval, ideas can have free reign, but cowboy projects won't sabotage IT's charter. At one CIO's company, anyone can generate an idea for an IT investment. He has developed a form to describe the business case for each project, which must be completed before a proposal can be submitted to the steering committee. Project proponents have to review the ROI and explain whether it fulfils a goal of the organization's strategic plan. The process ensures that every idea can be considered and that everyone knows what he has to do for his proposal to pass muster with the IT steering committee.