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Deciding Factors

Deciding Factors

Top performers use IT governance styles appropriate to their business orientation.

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 enterprises have different business governance arrangements. 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 organised.

For example, if an enterprise was highly centralised, 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.)

Gartner EXP research team worked again with MIT Sloan School's Peter Weill to further investigate how business governance shapes - or should shape - IT governance. We looked at a group of companies that were among the top financial performers in their industries and also had good IT governance. We then identified critical aspects of both their business and IT governance, and identified the key mechanisms that make governance work effectively in different situations.

Three business orientations - synergistic, agile and autonomous - shape different business governance arrangements. While your business or government agency probably has some attributes of all three, one likely dominates. (And if you can't tell which one dominates, that might explain why you are having challenges with your 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.

Effective synergistic enterprises have clear decision processes, executive input and IT-business unit relationship managers. Synergistic enterprises face strong pressures for firm-wide integration from their marketplaces and leverage the similarities across their business units through enterprisewide leadership.

Enterprises striving for business unit synergy take an enterprisewide approach as much as possible. They increase integration, leverage similarities and implement common processes across business units. They also mandate standards, especially in IT infrastructure components, such as desktops, e-mail, IT security, ERP and other enterprisewide applications.

Our research found that in top-performing synergistic enterprises, some governance styles work better than others. For IT principles and IT investment and priority decisions, top-level business commitment was critical. For IT infrastructure and IT architecture decisions, high- level business involvement was part of top-down technology mandates.

ADVO, the US direct mail advertiser, illustrates the tight coupling between business and IT decision-making by a synergistic firm. Its top two IT governance committees - IT steering committee and IT prioritisation team - mainly comprise business members. The IT steering committee, with eight business functional heads, decides on IT capital expenditures. It also monitors large approved projects monthly.

The IT prioritisation team governs the expense side of IT. Each business function is represented on the team, which meets every two weeks with IT's applications maintenance director. Each function brings its top three maintenance service requests to the meeting. The team down-selects to the top 10, ADVO-wide, and approves the work for the outsourcer.

Agile enterprises make greater use of principles, education and communication. Enterprises striving for agility aim for faster decision-making and action than their competitors. Their nimbleness comes from paying close attention to their markets, generally at a local level, and their enterprisewide structures emphasise coordination.

Business governance in agile enterprises is aimed at speedy decision-making and the ability to coordinate the efforts of business units or divisions. IT governance styles and mechanisms also need to enable fast decision-making and execution.

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