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Understanding IT Governance – Part Two

This is the final part of a two part series discussing the ten key principles of IT Governance. Part two will cover the last five principles of ten in total.

Key Principles 6-10

6. Provide the right incentives

One of the most common problems with incentives and reward systems is the misalignment with the behaviours the IT governance arrangements were designed to encourage. The most prevalent matter is around how the organisation can expect governance to work when the incentive and reward systems are driving a different behaviour. We believe this is bigger than IT governance, none the less it does contribute to the ineffectiveness when incentives are not aligned to organisational goals.

Avoiding financial disincentives to desirable behaviour is as important as offering financial incentives. For example, some organisations don’t charge for architectural assistance to encourage project teams to consult with architects. It’s one of the common problems with charge back when business units make their own decisions and don’t consult internal specialists to avoid paying for internal services.

It’s hard to overestimate the importance of aligning incentives to governance arrangements, however if a well designed IT governance system is not effective, one of the first places to investigate is the incentives.

7. Assign ownerships and accountability for IT Governance

It’s the old chestnut of management commitment. Like any major organisational initiative, IT governance must have an owner and accountabilities. More often than not, the board is responsible for all governance, but sometimes will delegate an individual or group within an organisation to be accountable. By selecting the right person or group, the board should consider some issues:-

Firstly, IT governance cannot be designed in isolation from other key assets of the firm. For this reason, the individual or group must have a holistic view of the enterprise and good relationships and credibility with the business leaders in the organisation.

Secondly, IT governance cannot be implemented alone. It should be made clear by the executive team that all managers are expected to contribute in the same way they would to other governance such as financial or other key assets.

Thirdly, IT assets are becoming more and more important to the successful performance of most enterprises. The individual or group that owns IT governance must understand what the technology is and isn’t capable of. Technical details are not critical but an understanding for the two way connection between strategy and IT.

It is generally the board or CEO that holds a CIO accountable for the IT governance performance with some clear measures of success. It is the responsibility of the board or CEO to announce the CIO as being accountable for IT governance and this is essential for the success of IT governance. Without this, it is very hard for CIO to engage the senior management team in the process.

8. Design governance at multiple organisational levels

For large organisations that have multiple business units, it’s beneficial to consider designing IT governance at multiple levels. A good starting point for enterprise wide IT governance is driven by a small number of strategies and goals. These separate layers of IT governance exist in divisions, business units or geographies and should be part of a holistic level of IT governance. At the lower levels of an organisation there is a demand for synergy, whereas the need for autonomy between business units is greatest at the higher levels in an organisation.

As the lower levels of governance are more often than not influenced by mechanisms designed at the higher levels, it is recommended that enterprise wide IT governance is the starting point when designing governance. As starting at the higher level is sometimes not possible, starting at the business unit level can be more practical.

9. Provide transparency and education

It’s quite impossible to have too much transparency or education when it comes to IT governance. Transparency and education go hand in hand as the more education you have, the more transparency and vice versa. This can be facilitated using portals, intranets, workshop breakfasts and many other ways of marketing IT governance.

Portals should include tools and resources such as a glossary of IT terms and acronyms. Some portals provide templates for proposing IT investments complete with cost model calculators.

The less transparent the governance processes are, the less people follow them. The more special deals are made, the less confidence there is in the process and the more workarounds are used. The less confidence there is in the governance, the less willingness there is to play by rules designed to lead to increased firm-wide performance.

Communication and support of IT governance from the executive team is the most important role they play.

10. Implement common mechanisms across the six key assets

These six key assets are how enterprises accomplish their strategies and generate business value.

Human assets: people, skills, career paths, training, reporting, mentoring, competencies and so on
Financial assets: Cash, investments, liabilities, cash flow, receivables and so on
Physical assets: Buildings, plant, equipment, maintenance, security, utilisation and so on
IP assets: Intellectual property (IP), including product, services, and process know how formally patented, copyrighted or embedded in people and systems.
Information and IT assets: Data, information, knowledge about customers, processes performance, finance, information systems and so on
Relationship assets: Relationships within the enterprise as well as relationships, brand, and reputation with customers, suppliers, business units, regulators, competitors, channel partners and so on

For example, an organisation that decides to implement a single point of customer contact strategy must coordinate assets to deliver that uniform experience. Just having good customer loyalty (that is, relationship assets) without the products to sell (IP assets) will drain value. Not having well-trained people (human assets) to work with customers supported by good data and technology (information and IT assets) will drain value. Not having the right buildings and shop fronts to work from or in which to make the goods (physical assets) will drain value. Finally, not coordinating the investments needed (financial assets) will drain value.

Put this way, the coordination of the six assets seems blindingly obvious.