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,” p. 28.) 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.

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. In those companies, managers at all levels throughout the enterprise apply that design as they make daily decisions about the use of IT. Further, 60% to 80% of senior executives in those companies have a clear understanding of and can describe their IT governance. In fact, senior management awareness of IT governance is the single best indicator of its effectiveness.

The effectiveness of an enterprise’s or business unit’s IT governance can be assessed by evaluating how well it enables IT to deliver on four objectives: cost-effectiveness, asset utilization, business growth and business flexibility. Our research, which weighed each factor according to its relative importance to each company, showed that governance performance varies significantly across enterprises in an approximately bell-shaped distribution. (See “Assessing IT Governance Performance,” p. 29.) According to this measure, high IT governance performance correlated with the achievement of other desired measures of success. For example, companies that effectively govern information technology garner profits that are 20% higher than those of other companies pursuing similar strategies.1 They also achieve higher returns on equity and growth in market capitalization.

Although it cannot be concluded that superior governance performance causes superior financial performance, it can definitely be said that the two measures correlate quite well. It is certainly plausible that the two are linked. Effective governance aligns IT investments with overall business priorities, determines who makes the IT decisions and assigns accountability for the outcomes. IT is inextricable from other key enterprise assets