Effective IT governance is a process that helps organizations ensure they have the right information, processes and procedures in place so they can effectively plan and manage their IT investments.
Effective IT governance offers an organization the ability to manage and control its IT resources in a way that allows the business to operate efficiently and effectively. This includes setting and enforcing standards, policies, and regulations, as well as making sure that the necessary resources are available to support the company’s goals. It is important to have effective IT governance in place so that the business can take advantage of new technologies and innovations while still staying within the bounds of what is allowed by law or policy.
IT projects also have warning signs and patterns of failure that most organizations miss because they do not have the ability to make sense of the data. These warnings are buried not just in project plans, budgets, and demand plans, but more importantly in the myriad of day-to-day interactions and exchanges between clients, managers, developers, operations teams, and everyone involved in the process of delivering IT. Here is where the real risks lie. The key to effective governance is defining a system to tap into that data and put it into the hands of the people who can most effectively make decisions based on it .
The key to effective IT governance is having the ability to make sense of data in order to identify warning signs and patterns of failure in IT projects. Most organizations lack this ability and as a result, they miss these warnings which can lead to disastrous consequences. However, organizations that have a system in place to collect and provide the right data to the right people so they can make decisions based on it are said to have developed an effective IT Governance.
So how do you manage and measure the effectiveness of your IT governance solution for your business?
The IBM IT Governance Approach is a method that describes what needs to be done in order to implement effective IT governance solutions.
In today’s business economy, a well-functioning and effective IT governance is critical for the success of an organization. It offers the company opportunities to improve how it does business and it is strategic for the growth of the company. This importance and reliance on good IT governance makes it an essential part of the governance responsibilities of the enterprise, not only for investors but also for regulators and auditors. Having said that, effective IT governance is no longer optional for businesses. Good governance enables agility and speed by establishing decision-making authority at the right levels of the IT organization.
In the article ‘The keys to effective IT governance in the digital era’, Mary Pratt Contributing writer, CIO, provides the following recommendations from experts for governance to be up to challenges of today:
IT governance ownership must shift from CIOs to the broader organizational leadership
IT governance is a critical capability for enterprises, and it must be defined and championed by the senior leadership. The board of directors and executive team are responsible for governance, while the CIO advises or validates on the design of IT governance. It’s up to the board to determine the guardrails around issues such as risk tolerance, security and compliance.
Enterprise leaders must update their views on governance
Executive leaders, including CIOs, need to understand that good governance is a digital enabler rather than a set of restrictions. Good governance enables agility and speed by establishing decision-making authority at the right levels of the IT organization.
Governance should be focused on outcomes, not fixed processes
Many organizations are still using traditional control-based IT governance, which is not effective in the fast-paced digital business era. In order to keep up with the competition, enterprises need to shift their focus to outcomes and have the ability to change as frequently as necessary. This way, they can take into account situational awareness and make decisions quickly and effectively.
Automation can help promote adherence to governance
In order for IT to be effective, it needs to use the same technologies that are automating business workflows. Technologies such as provisioning, incident management and problem management should be leveraged to enforce consistency and support the speed required to keep pace with business today.
Governance must be tailored to current, unique needs
Different organizations have different needs, and as a result, there are multiple IT governance frameworks. Many of these frameworks are being updated to address the needs of modern enterprises in light of digital transformation. For example, ISACA refreshed its COBIT framework. However, organizational leaders often think that frameworks should provide all the answers to their challenges. This is not actually their role- the frameworks are more of a blueprint for organizations to create their own framework.
Governance must be adjusted more frequently than in the past
In order for an organization to be successful in the digital age, it is necessary for its IT governance to continuously evolve. This means that the governing principles of the company must be assessed and updated whenever there are changes in how the business is conducted or when new technologies are introduced. The CIO and C-suite executives must recognize that this is now a normal part of doing business and allocate the necessary resources to ensure that governance can keep up with ever-changing digital demands.
In their book, ‘IT Governance: How Top Performers Manage IT Decision Rights for Superior Results’, Peter Weill, Jeanne W. Ross, conclude that “effective IT Governance is the single most important predictor of the value an organization generates from its IT.”
In order to have an effective IT governance, it is important that your organization has designed a set of IT governance mechanisms (committees, budgeting process, approvals and so on). This will help encourage the behavior among employees that is consistent with the company’s mission, strategy, values and culture. Without these governing mechanisms in place, oftentimes IT can end up sabotaging business strategy instead.
Effectively governing IT is critical for enterprises as their dependence on information and technology continues to grow. However, it requires a lot of time and attention from management. So, is it worth it? The answer is unequivocally yes. Good IT governance brings harmony between the decisions made about the management and use of IT with the desired business objectives. Without well-designed and implemented governance structures, companies leave this harmony to chance.
Peter Weill and Jeanne W. Ross provide 8 reasons on why IT decision making should not be left to chance and thus needs good governance. They are as follows:
Good governance pays off
A well-run organization understands that good governance is essential to success and must be practiced in all areas of the company. In fact, their study found that above average governance performing firms had ROAs more than 20% higher than the firms with poorer governance pursuing the same strategy. This indicates that having effective IT governance can help improve an organization’s overall performance.
IT is expensive
IT is exceeding 50% of the annual total capital investment of many enterprises. As IT has become a more important and integral part of most businesses, senior management is struggling to keep up with how best to manage and control it. Often, this leads to enterprises creating or refining their IT governance structures. This way, they can better focus IT spending on the company’s strategic priorities.
IT is Pervasive
In order to have an effective IT governance in place, it is important that the right people are making the decisions about IT spending and initiatives. This means that the decision makers need to be distributed throughout the enterprise, and not just concentrated in the IT group. Additionally, centralized IT management is no longer possible or desirable in many enterprises. The reason for this is because requests for IT spending now come from all over the enterprise, not just from the IT group. As a result, well-designed IT governance arrangements are necessary to distribute IT decision making to those responsible for desired outcomes.
New Information Technologies Bombarded Enterprises with New Business Opportunities
In order to keep up with the changing times, many businesses are turning to technology to help them stay ahead. However, with this rapid expansion of technology comes a whole new set of challenges and risks. Effective IT governance is key in helping an organization manage and capitalize on these opportunities while mitigating the associated risks. A well-governed IT department will have a flexible infrastructure that can balance costs with the current business needs. Effectively governing an organization’s IT infrastructure is critical in order to maintain a competitive edge in the market. By implementing formal governance processes, an enterprise can harmonize desirable behaviors and IT principles, allowing for better anticipation of future technological changes.
IT Governance Is Critical to Organizational Learning About IT Value
A well-functioning IT governance framework is essential for enterprises that want to maximize the value of their IT related initiatives. Value cannot always be demonstrated through a traditional discounted cash flow analysis, as it results from incremental process improvements as well as the ability to respond to competitive pressures. Effective governance creates mechanisms through which enterprises can debate potential value and formalize their learning. In other words, they learn via exceptions – where a different approach from standard practice is used for good reasons. Effective governance makes learning via exceptions explicit and shares any new practices across the enterprise if appropriate.
IT Value Depends on More Than Good Technology
Recently, many large IT investment initiatives have floundered. Most of these failures can be attributed to the inability of organizations to adopt new processes that apply new technologies effectively. In order to prevent these failures, organizations need to develop effective IT governance. This means having the right people in place, setting up the right processes, and creating the right culture. Without effective IT governance, large IT investments can quickly become a waste of time and money. In order for an organization to have a successful IT implementation, it is critical that the right people are involved in the decision-making process. If senior managers abdicate their responsibility to IT executives, disaster often ensues. By having a mix of business and technology leaders at the table, the organization can achieve both greater strategic applications and greater buy-in from stakeholders.
Senior Management has Limited Bandwidth
In order for a company to have effective IT governance, it is important that the senior management does not become bogged down with every request for an IT investment. Furthermore, they should not be trying to make all the decisions when it comes to IT-related topics. If this happens, it can create inconsistency and chaos within the organization. However, through careful design, IT governance can provide a transparent decision making process which will lead to better results and be inline with the vision of senior management.
Leading Enterprises Govern IT Differently
Top performing firms have found governance models that work well for them and blend centralized and decentralized decision making. This allows them to balance multiple performance goals. By being transparent about the tensions around IT decisions, such as standardization and innovation, these organizations can make better decisions that benefit the entire company.
References
Weill, P. & Ross, J. W., 2004, IT Governance: How Top Performers Manage IT Decision Rights for Superior Results”, Harvard Business School Press, Boston.
Mary Pratt, 2018, The keys to effective IT governance in the digital era, CIO.com
Matthew Magee et al., 2008, IBM IT Governance Approach Business Performance through IT Execution