Strength in Numbers

Individual governance mechanisms, no matter how well they are implemented, cannot alone promise effective IT governance. Top performing companies rely on a set of governance techniques that are simple, reinforcing, coherent and explainable, and that engage key decision-makers.

UPS, for example, has designed a coherent set of governance mechanisms. The company relies on its IT steering committee, a team of three senior executives (including the CIO), to establish IT principles, such as UPS's commitment to standardization and scalability in any system that touches its 60,000 drivers. This principle ensures reliability, cost-effectiveness, consistent customer service and easy access for customers to their package data. An IT governance committee - a small team of IT executives headed by the CIO - follows the mandates of the IT steering committee in making key architecture decisions. But the IT governance committee represents only one step in the debates around technology standards. The top IT architect - a CIO report and a member of the governance committee - heads a standards committee of key technologists who determine when a standard has become obsolete or cannot meet the requirements of a specific application. This committee handles most of the daily negotiations around standards, but it escalates decisions up to the IT governance committee when members believe a standards decision has implications beyond the application in question. Similarly, in cases where the IT governance committee believes a standards decision will have long-term strategic implications for the enterprise, the CIO can escalate the decision to the IT steering committee. The objective is to gain the benefits of standardization without stifling business opportunities.

Road Map to Good Governance

From our research with top performing organizations such as UPS, we've gleaned the following principles of effective design and implementation of IT:

Limit the number of decision-making structures. Although all organizations want IT decisions to represent the interests of their varied stakeholders, the best companies assign clear responsibilities for each type of IT decision to individuals who can accept accountability for the outcomes of those decisions.

State Street has vested IT decision-making responsibilities with a small number of executives. The key decision-making body for IT principles and for investment and prioritization decisions is the IT executive committee (ITEC). Comprising the COO, the CAO, the CIO and senior executives from State Street's various business units, ITEC clarifies IT objectives, establishes the annual enterprisewide IT budget, and negotiates the approved list of projects and IT infrastructure initiatives. ITEC relies on the IT leadership group, which consists of senior business unit and corporate IT managers, to convert its principles and investment decisions into infrastructure services. The IT leadership group is also responsible for architecture decisions.

While State Street limits high-level IT decisions to a small group of accountable executives, the company uses alignment processes and communication approaches (such as those listed in "Effective IT Governance Mechanisms") to engage people up and down the ranks of the organization. State Street uses service-level agreements, chargeback, project-resource and business-value tracking, an enterprisewide budget process, and senior management announcements to clarify desirable behaviour and individual responsibility for IT management and use.

Create overlapping responsibilities for IT decisions. The five types of IT decisions listed at the beginning of this column are interrelated, so while responsibility for making these different decisions might be distributed across the enterpri se, companies need to ensure cross-coordination. Top performers in our study often rely on overlapping membership in their decision-making bodies. At Campbell Soup, the CIO sits on the executive committee that sets the company's strategic direction. She also heads an IT leadership team responsible for IT principles that establishes mandates for Campbell's IT architecture and infrastructure. In turn, Campbell's architecture review board is headed by a member of this IT leadership team. The architecture review board works with the company's project management office, as well as program review and compliance teams, to ensure projects conform to architectural standards and meet business objectives. These overlapping memberships coordinate decisions throughout the enterprise so that the strategic objectives filter down to decisions made on individual projects.