marianne broadbent, phd group vice president exp worldwide research head gartner designing effective...

Marianne Broadbent, PhDGroup Vice President

EXP Worldwide Research HeadGartner

Designing Effective IT Governance

ACIS Conference, Melbourne

November 2002


Effective IT Governance: Key Issues

1. What are the components of top level IT governance

2. How can these components be represented?

3. When and where are different types of IT governance arrangements effective?

4. How can you show the linkages between your enterprise goals and IT governance?

5. How can you improve your IT governance?

The research

– MIT Sloan CISR Study, led by Peter Weill, with Gartner EXP*

– 250+ Gartner EXP members, 23 countries

– Complex enterprises, demanding business environments

© 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc* Core team: Peter Weill (MIT), Marianne Broadbent (Gartner), Chris Foglia (MIT), Susie Lee (MIT), Chuck Tucker (Gartner)






4. How can you show the linkage between your enterprise goals and IT governance?




IT governance has 3 major components

A. What decisions need to be made?. . . Decisions about major IT domains

B. Who has decision and input rights?. . . Rights are exercised in different governance styles

C. How are the decisions formed and enacted?. . . Multiple mechanisms make governance work

© 2002 MIT Sloan Center for Information Systems Research (CISR). This material is adapted from Weill & Woodham's work originally published and copyrighted by the MIT Sloan CISR as Working Paper No. 326, "Don't Just Lead, Govern: Implementing Effective IT Governance," April 2002, and is used by Gartner with permission.

THE THREE COMPONENTS


A: What decisions need to be made? . . Clarify five major IT decision domains

IT principles High level statements about how IT is used in the business

IT infrastructure strategies

Strategies for the base foundation of budgeted-for IT capability (both technical and human), shared throughout the firm as reliable services, and centrally coordinated (e.g., network, help desk, shared data)

IT architecture

An integrated set of technical choices to guide the organization in satisfying business needs. The architecture is a set of policies and rules that govern the use of IT and plot a migration path to the way business will be done (includes data, technology, and applications)

IT investment and prioritization

Decisions about how much and where to invest in IT including project approvals and justification techniques

Businessapplication needs

Business applications to be acquired or built



B. Who has decision rights and inputs?. . Rights exercised in six governance styles

Note: Some Governance styles were inspired by Davenport, 1997.

C-level executives, as a group or individuals, including the CIO (but not acting independently)

C-level executives and at least one other business group

IT executives and at least one other business group

Business unit leaders or their delegates

Individuals or groups of IT executives

Each individual business process owner or end user

Business Monarchy

Federal

Duopoly

Feudal

ITMonarchy

Anarchy

Style Who makes the decisions?



C. How are the decisions formed, enacted? . . Many mechanisms make governance work

Source: Adapted from Weill and Woodham, 2002; M. Broadbent & P. Weill , Leading Governance, Business and IT Processes, ITEP Findings, 1998

Service-level agreements Specify, measure IT services

Business/IT relationship managers Ensure feedback, good iteration

Governance mechanisms Objective

IT council of business, IT executives Focus on driving value

Architecture committee Identify strategic technologies

Process teams with IT members Take a process view

Executive committee Take a holistic view

IT leadership committee Coordinate across the enterprise

Chargeback arrangements Shape behavior, recoup costs


How to represent IT governance arrangements?

IT principles

IT infrastructurestrategies

IT architecture

Businessapplication

needs

IT investment

BusinessMonarchy

ITMonarchy

Feudal

Federal

Duopoly

Domain

Style

Anarchy

Don’t Know

© 2002 MIT Sloan Center for Information Systems Research (CISR). This framework is adapted from Weill & Woodham's work originally published and copyrighted by the MIT Sloan CISR as Working Paper No. 326, "Don't Just Lead, Govern: Implementing Effective IT Governance," April 2002, and is used by Gartner with permission.

?IT Governance Arrangements Matrix


© 2002 Gartner, Inc. and MIT Sloan Center for Information Systems Research (Weill) drawing on the framework of Weill and Woodham, 2002.

Drive enterprise-wide growth & change – a Bank

IT Governance Arrangements Matrix

Input Decision

IT principles

Biz leadersIT leaders

Corp officeCIO

Input Decision

IT infrastructurestrategies

CIOIT leaders

CIOIT leaders

Input Decision

IT architecture

Arch officeCIO


Input Decision


Corp officeCIO

Biz leadersBiz proc own

Input Decision

IT investmentand prioritization


BT managers

BusinessMonarchy

ITMonarchy

Feudal

Federal

Duopoly

Domain

Style

Governance mechanisms

Proj councilCorp office

Value realization processIT leadership groupIT leaders

Business technology relationship managers

Biz proc ownCIO office and staffCIO

BT managersOffice of architectureArch office

Regional project councilsProj councilCorporate office (CEO, CIO, 3 biz heads)Corp office

Business process owners

Input rights Decision rights



Duopoly input reflects business governance ... Government Enforcement Agency

IT Governance Arrangements Matrix

Input Decision

IT principles

Mgt boardBiz pro ownIM leaders

IMSGDir of infoMgt board

Input Decision


Dir of infoIM leaders

Dir of infoIM leadersBiz liaison

Input Decision

IT architecture

Dir of infoIM leaders

IIM leadersArch comm

Input Decision


IMSGDir of info

IM l leadersBiz liaison

Biz pro own

Input Decision

IT investmentand prioritization

IMSGE-wide budget

IT portfolio

BusinessMonarchy

ITMonarchy

Feudal

Federal

Duopoly

Domain

Style


IMSGDir of info

Enterprise-wide IT budget managementE-wide budgetFormal IT portfolio approachIT portfolio

Architecture committeeArch commInformation management leadership groupIM ldrship

Business program/project ownersBiz pro ownDirector of informationDir of info

Business liaison officersBiz liaisonInformation management steering groupIMSG



Input and decision style patterns in IT governance of a range of organisations

Numbers are percentages of the 256 Gartner for-profit and not-for-profit enterprises studied in 23 countries in 2002

Input Decision

IT principles

0 27

1 18

0 3

83 14

15 36

Input Decision


0 7

10

1 2

59 6

30 23

Input Decision

IT architecture

0 6

20

0 0

46 4

34 15

Input Decision


1 12

0 8

1 18

81 30

17 27

Input Decision


1

0 10

0 3

93 27

306

BusinessMonarchy

ITMonarchy

Feudal

Federal

Duopoly

0 0 0 1 0 1 0 3 0 1Anarchy

1 2 0 2 0 1 0 2 0 0Don’t Know

© 2002 MIT Sloan Center for Information Systems Research (CISR). This framework is adapted from Weill & Woodham's work originally published and copyrighted by the MIT Sloan CISR as Working Paper No. 326, "Don't Just Lead, Govern: Implementing Effective IT Governance," April 2002, and is used by Gartner with permission.

Common decision rights styles

Common input styles

Domain

Style

30

7359

27


Business and IT executive collaboration mark high IT governance performers

© 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc, drawing on the framework of Weill and Woodham, 2002.

IT principlesIT infrastructure

strategiesIT architecture



BusinessMonarchy

ITMonarchy

Feudal

Federal

Duopoly

Anarchy

Domain

Style

Top three performers as measured by governance performance

1 2 3


Not Effective Very

© 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc.

Top IT governance mechanisms focus on business and IT relationships

% respondentsusing

85

87

71

89

86

96

89

56

67

62

79

62

IT Governance mechanism effectiveness

1 2 3 4 5

Chargeback arrangements

Web-based portals, intranets for IT

Formally tracking IT’s business value

Architecture committee

Capital approval committee

Service level agreements

Tracking of IT projects and resources

Process teams with IT members

Executive committee

IT council of business and IT executives

IT leadership committeeBusiness/IT relationship managers


Example of an effective IT governance arrangements matrix

© 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc. drawing on the framework of Weill and Woodham, 2002.

Exec commBiz leaders

Exec commIT leadership

CIOIT leadership


CIOIT leadership

Biz leadersBiz pro own

Biz/IT rel mgs



Cap appr comm


Business/IT relationship managersBiz/IT rel mgsCIO, CIO’s office and biz unit CIOsIT leadership

Business process ownersBiz pro ownBusiness unit heads/presidentsBiz leaders

Exec comm subgroup, includes CIOCap appr commExecutive committee ‘C’ levels)Exec comm

Input Decision

IT principles

Input Decision


Input Decision

IT architecture

Input Decision


Input Decision


BusinessMonarchy

ITMonarchy

Feudal

Federal

Duopoly


Domain

Style



*Statistically significant relationship with governance performance© 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc

High governance performers have sharper strategies, focus and commitment*

Characteristics of high IT governance performers More focused strategies

– Greater differentiation between customer intimacy, product innovation, or operational excellence

Clearer business objectives for IT investment– Greater differentiation between supporting new ways of doing

business, improving flexibility, or facilitating customer communication

High level executive participation in IT governance– Greater involvement, impact of CEO, COO, Business Heads,

Business Unit CIOs and CFO

– Who could accurately describe IT governance arrangements

Stable IT governance, fewer changes year to year Well functioning formal exception processes Formal communication methods


Map IT governance to enterprise goals . . . Harmonize ‘what’ and harmonize ‘how’

ENTERPRISE GOALS

IT GOVERNANCE STYLE

PERFORMANCE MEASURES

Financial drivers Business maxims

Decision rights for the five IT domains

Business performance indicators


How How How

What What

DESIRABLE IT BEHAVIORS

IT GOVERNANCE MECHANISMS

IT METRICS & ACCOUNT-

ABILITIES


ENTERPRISE GOALS- Examples -

IT GOVERNANCE STYLE- Examples -

IT GOVERNANCE SAMPLE MECHANISMS

PERFORMANCE MEASURES- Examples -

SAMPLE IT METRICS & ACCOUNTABILITIES

SAMPLE DESIRABLE IT BEHAVIORS


Financial Drivers- Growth

Business Maxims- Greater customer focus - Balance local/enterprise- Speed, flexibility

Enable high-level, consistent customer relationships

Treat all IT investments as business change projects

Build for future flexibility

Business Monarchy - IT principles- Biz application needs- IT investment

IT Monarchy decides- IT infrastructure - IT architecture

Formal Corporate Office involvement Regional Project Councils- 3 tier approach

Investment in IT as a portfolio


Level of business ownership of projects

Penetration of franchise-wide platform

Level of common technology, common data definitions

Use of franchise-wide metrics

Quality of customer relationships

Bigger share of customer

Faster time to market

Harmonized goals, styles and metrics . . . Regional Bank


Harmonized goals, styles and metrics . . . Government Enforcement Agency








Financial Drivers- Cost efficiencies

Business Maxims- Info to do job anywhere - Operational excellence- Greater BU synergies

Joint decision making across businesses

Disciplined investment Business ownership of

IT-related programs Re-use of systems,

technologies

Business Monarchy decides- Business app needs- IT investment

Federal decides- IT infra strategies

IM Steering Group exec level reporting, investment

Formal IT portfolio approach

Business owners > benefits realization

Biz/IT relationship managers

Known accountabilities for investments, benefits

Greater process, IT resource standardization

Lower cost base Increased re-use of

systems, technologies, resources

Reduced rate of increase in cost base

Extent of integrated decision making across business units


Recommendations which shape effective IT governance

Design IT governance thoughtfully. . . Don’t have ‘governance by default. . . Carefully design IT governance for each IT domain

Focus on a few goals, desirable behaviors, and metrics . . . Good governance requires choices to optimize

Educate executives: IT governance is important. . . Without top level input, poor decisions are made . . . Good IT governance helps business executives achieve success

Build transparency into your governance arrangements. . . More transparency => more confidence. . . ‘No transparency, no trust’, CIO, InterAuto

Change IT governance to change behaviors. . . Shifts need to occur when strategy changes. . . New arrangements takes time to communicate, implement

© 2002 Gartner, Inc. and MIT Sloan Center for Information Systems Research (Weill)


Use three tools to assess where you are as the basis for moving forward


1 Assess your current IT governance effectiveness Complete the IT Governance Effectiveness Self-Assessment. . . Use the 6 leading indicators for effective IT governance

2 Chart and analyze your current arrangementsComplete the IT Governance Arrangements Matrix. . . Depict who makes what decisions now, and show mechanisms

3 Map and critically review IT governance congruenceComplete the IT Governance Congruence Framework. . . Show the trail of evidence linking business, IT goals and metrics

4 Identify where you need to go. . . Focus on a few goals, desirable behaviors, metrics. . . Design your future IT governance thoughtfully. . . Show your IT governance is transparently linked to enterprise goals

5 Gain support for the effort and implement. . . Clarify why IT governance is critical to your enterprise. . . Communicate needed changes using the tools




Characteristics of high IT governance performers More focused strategies

– Greater differentiation between customer intimacy, product innovation, or operational excellence

Clearer business objectives for IT investment– Greater differentiation between supporting new ways of doing

business, improving flexibility, or facilitating customer communication High level executive participation in IT governance

– Greater involvement, impact of CEO, COO, Business Heads, Business Unit CIOs and CFO

– Who could accurately describe IT governance arrangements Stable IT governance, fewer changes year to year Well functioning formal exception processes Formal communication methods


© 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc. drawing on the framework of Weill and Woodham, 2002.


Exec commIT leadership

CIOIT leadership


CIOIT leadership


Biz/IT rel mgs



Cap appr comm


Business/IT relationship managersBiz/IT rel mgsCIO, CIO’s office and biz unit CIOsIT leadership

Business process ownersBiz pro ownBusiness unit heads/presidentsBiz leaders

Exec comm subgroup, includes CIOCap appr commExecutive committee ‘C’ levels)Exec comm

Input Decision

IT principles

Input Decision


Input Decision

IT architecture

Input Decision


Input Decision


BusinessMonarchy

ITMonarchy

Feudal

Federal

Duopoly


Domain

Style











Financial Drivers- Growth

Business Maxims- Greater customer focus - Balance local/enterprise- Speed, flexibility

Enable high-level, consistent customer relationships

Treat all IT investments as business change projects

Build for future flexibility

Business Monarchy - IT principles- Biz application needs- IT investment

IT Monarchy decides- IT infrastructure - IT architecture

Formal Corporate Office involvement Regional Project Councils- 3 tier approach

Investment in IT as a portfolio


Level of business ownership of projects

Penetration of franchise-wide platform

Level of common technology, common data definitions

Use of franchise-wide metrics

Quality of customer relationships

Bigger share of customer

Faster time to market



Use three tools to assess where you are as the basis for moving forward





4 Identify where you need to go. . . Focus on a few goals, desirable behaviors, metrics. . . Design your future IT governance thoughtfully. . . Show your IT governance is transparently linked to enterprise goals

5 Gain support for the effort and implement. . . Clarify why IT governance is critical to your enterprise. . . Communicate needed changes using the tools

marianne broadbent, phd group vice president exp worldwide research head gartner designing effective...

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