A Matrixed Approach to Designing IT Governance

Throughout an organization, individuals make decisions daily that influence the need for and the value received from information technology. A simple one-page framework can help companies allocate IT decision rights and accountabilities so that individual IT decisions align with strategic objectives.

Every enterprise engages in IT decision making, but each differs considerably in how thoughtfully it defines accountability and how rigorously it formalizes and communicates decision-making processes. Without formal IT governance, individual managers are left to resolve isolated issues as they arise, and those individual actions can often be at odds with each other. Our study of almost 300 enterprises around the world suggests that IT governance is a mystery to key decision makers at most companies. On average, just one in three senior managers knows how IT is governed at his company. (See “About the Research.”) In this case, ignorance is definitely not bliss. When senior managers take the time to design, implement, and communicate IT governance processes, companies get more value from IT.

About the Research »

While the research did not identify a single best formula for governing IT, one thing is abundantly clear: Effective IT governance doesn’t happen by accident. Top-performing enterprises carefully design governance.

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References

1. P. Weill and J. Ross, “IT Governance: How Top Performers Manage IT Decision Rights for Superior Results” (Boston: Harvard Business School Press, 2004).

2. See J.W. Ross, “United Parcel Service: Delivering Packages and e-Commerce Solutions,” working paper 318, MIT Sloan School of Management, Center for Information Systems Research, Cambridge, Massachusetts, 2001.

3. For a discussion of hybrid governance arrangements, see C.V. Brown and S.L. Magill, “Reconceptualizing the Context-Design Issue for the Information Systems Function,” Organization Science 9, no. 2 (March–April 1998): 176–194.

4. The analysis was adjusted for industry differences so that companies were compared to competitors.

5. For more information see www.manheim.com and R. Woodham and P. Weill, “Manheim Interactive: Selling Cars Online,” working paper 4160-01, MIT Sloan School of Management, Center for Information Systems Research, Cambridge, Massachusetts, August 2001.

6. For a more complete description of governance and architecture at ING DIRECT, see D. Robertson, “ING DIRECT: The IT Challenge (A)” and “ING DIRECT: The IT Challenge (B),” IMD-3-1344 and IMD-3-1345, IMD International, Lausanne, Switzerland 2003.

7. For a more complete description of IT governance at Carlson Companies, see P. Weill and J. Ross, “Mechanisms for Implementing IT Governance,” chap. 4 in “IT Governance: How Top Performers Manage IT Decision Rights for Superior Results” (Boston: Harvard Business School Press, 2004).

8. See V. Sambamurthy and R.W. Zmud, “Arrangements for Information Technology Governance: A Theory of Multiple Contingencies,” MIS Quarterly 23 (June 1999): 261–288. The authors find that corporate governance is one of three important contingencies influencing IT governance arrangements in organizations. The other two contingencies are absorptive capacity and economies of scope.

9. References to TVA excerpted with permission from Gartner. See M. Broadbent and P. Weill, “Effective IT Governance: By Design,” Gartner EXP Premier Report, Gartner Inc., January 2003.

10. In our research, we found that companies with effective governance changed some aspect of governance about once per year, whereas companies with less effective governance changed governance as many as three times per year.

11. J.W. Ross, “Case Study — Dow Corning Corporation: Business Processes and Information Technology,” Journal of Information Technology 14, no. 3 (1999): 253–266.

Acknowledgments

Both authors contributed equally to this article and would like to thank all the managers who participated in the research as well as Marianne Broadbent, Mark McDonald and their colleagues at Gartner Inc. We also would like to acknowledge the MIT Sloan CISR Patrons and Sponsors for supporting this research.