Determine what arrangement of decision rights and accountability works well for your organization.
Corporate governance is transforming boardrooms across America, and it also has a place in the data center. Gartner and the Massachusetts Institute of Technology Sloan Center for Information Systems Research together define IT governance as the decision rights and accountabilities that encourage desirable behavior in the use of IT.
To establish effective IT governance, you need to get a handle on your company’s personality and set up the most appropriate decision-making processes between IT and business managers.
According to Gartner, there are three types of business orientations: synergistic, agile and autonomous. Knowing which one your company most identifies with is the first step to understanding what processes to implement.
Take the test
Use Gartner’s quiz to determine your firm’s business orientation.
1. Your company predominately aims for business processes that are:
a) Integrated and standard across all business units.
b) Modular, adaptable and able to be combined easily for new business initiatives.
c) Distinct to business units for local decision responsiveness.
2. Your company predominately aims for coordination to achieve:
a) Mandated synergies, minimized duplication and top-down innovation.
b) Front-line decision-making to enable rapid changes and recombination of assets.
c) Innovative capacity, primarily at the business-unit level.
3. Your enterprise predominantly aims for management systems in which:
a) Business units focus on business unit and enterprisewide strategies, following centrally defined and coordinated synergies.
b) Business units adapt to local conditions according to an enterprise-wide organizing logic.
c) Few mandated processes exist, and these are focused on financial and risk management.
If your answers were mostly ‘A’, your company is synergistic. A good example would be a bank that provides integrated financial services to customers, with technology pulling multiple product offerings together. Departments need to be tightly integrated to present a single face to the customer.
If your answers were mostly ‘B’, your company is agile. Examples could be entertainment firms or manufacturers, where the focus is on speedy decision-making and the ability to coordinate the efforts of the all the business units.
If your answers were mostly ‘C’, your company is autonomous. Although owned by the same company, each decentralized business unit makes its own decisions. Often, each unit is served by its own IT, human resources and finance functions.
Learn about governance styles
Once you’ve identified your company’s business orientation, it’s time to understand the six different IT governance styles – that is, the processes in which IT decisions are made.
• Business monarchy: The executive leadership – usually a council of IT and business chiefs – has the decision rights governing IT investment and prioritization.
• IT monarchy: The CIO (and business-unit CIOs, if applicable) has decision rights to IT architecture and infrastructure strategies.
• Feudal: Business-unit heads or their delegates have the decision rights, and authority could be localized.
• Federal: Corporate executives and at least one business group (which could be IT) share governance rights.
• Duopoly: Rights are shared between two groups, which could be IT and the business units, perhaps with a series of bilateral relationships with multiple business units. Alternatively, the two groups could be IT and a team of corporate executives.
• Anarchy: Individual owners or end users have decision rights. Decisions are made locally and on an ad hoc basis.
Consider the choices
The synergistic company: These tightly focused companies are best supported by a top-down technology mandate from an IT monarchy, says Marianne Broadbent, a Gartner research fellow. “The IT group works with corporate-level executives to set IT principles across the whole enterprise.”
The business monarchy and duopoly decision-making styles are also applicable, Broadbent says. Such decision processes let synergistic companies maximize economies of scale and reduce duplication.
The autonomous company: The opposite of synergistic firms, autonomous corporations focus on the front lines rather than the data center. IT leaders usually work one-on-one with individual business unit leaders. The federal and feudal styles work well with these organizations, according to Gartner.
Under a federal model, the corporate and business units set principles of how IT will be used, but emphasize business unit autonomy. A feudal style would let business units make decisions on business applications, IT investment and prioritization, while the central IT group is responsible for IT infrastructure.
The agile company: Agile companies need to move quickly, particularly at the local business-unit level. However, everyone in the company needs to understand the ground rules before they can be let loose. At all levels, roles and responsibilities should be clearly defined. Gartner says business monarchies typically set principles at agile companies, while the duopoly decision-making style works well for IT architecture, investment and prioritization.
