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An academic model must be tempered with a dose of reality to be effective. In most companies, the enterprise architecture function is more mature than the enterprise program management office function, and the IT HR function is typically at a low level of maturity. The executive steering committee, which should be comprised of senior leadership, both staff and line, is actually staffed with their
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delegates. In addition, in most organizations, the board of directors is not involved in IT. In severely dysfunctional companies, application delivery groups and operations groups have extraordinary disdain for each other because of the perceived barriers and hardships each has placed on the other. The IT Governance Institute, as shown in Appendixes 3B and 3C, provides an excellent and detailed description of the top issues IT management face and the mapping of these top issues to key individuals and governance bodies.
The executive steering committee is responsible for monitoring and evaluating performance management. Performance management tracks discovery projects, project portfolios, and asset portfolios through service-level agreements, balanced scorecards, and status reports that show the evaluation, variances, and explanations of planned versus actual results. Performance management involves measuring and assessing both tangible and intangible assets. It can be difficult to measure without a comprehensive picture of the current architecture and associated IT asset inventories (showing critical versus noncritical systems and solutions, dependencies, users, associated processes, etc.).
Performance management can be impacted by the criteria on which employees are measured and rewarded. These criteria may not match the performance management metrics. Also, too many measures can be disruptive and lead to analysis paralysis in management and causing confusion-driven inertia in workers.
Developed in the early 1990s by Drs. Robert Kaplan and David Norton, the balanced scorecard is used by members of the executive steering committee as one of several performance management frameworks for measuring effective IT governance. The balanced scorecard assesses financial measures, but it also provides three other measures. It evaluates the objectives, measures, targets, and initiatives within:
• Learning and growth perspective: evaluates whether the company is sustaining the ability to grow, adapt, and improve
• Business process perspective: assesses the processes a company should excel at in order to satisfy customers and stakeholders
• Customer perspective: determines how the company should appear to customers and if the customer needs are being addressed
• Financial perspective: provides the financial targets that must be met12
The balanced scorecard approach allows the IT investment committee to assess intangible factors and integrate long-term goals and objectives with near-term
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actions. It translates the company’s business and strategic objectives into a set of performance measures. For IT management, the balanced scorecard is essentially a navigation tool for managing IT performance against business objectives. Balance refers to cost and benefits, shareholders and customers, efficiency and effectiveness, long term and short term, as well as dependencies between investments and the priorities that drive success. More detail regarding the balanced scorecard is provided in Chapter 5.
Throughout this chapter we have focused on how IT governance is primarily a top-down centralization approach. A top-down approach is the traditional, holistic view of the company, where strategic intent, business and strategic objectives, key performance indicators, and critical success factors drive needs and requirements. These needs and requirements are compared against the existing architecture, and identified gaps manifest into projects prioritized according to the IT portfolio management framework. Companies that utilize the top-down approach usually have a higher probability of simplification and standardization of applications and infrastructure.
A bottom-up decentralization approach tries to balance the needs of the local entrepreneur in order to maintain maximum agility, responsiveness, innovation, and attention to customer needs. In some cases, a merger or acquisition could result in the parent company allowing the merged or acquired company to maintain its independence from corporate IT standards and guidelines. In this decentralized governance structure, local divisions are empowered to develop and fund projects that will help shape and define the business and strategic objectives. Company-wide simplification and standardization are not priorities for a bottom-up approach, as this will come later in maturity. Communication with the corporate division becomes essential, as business units are given a great deal of latitude, authority, and authorization to spend IT funds. Although management and control is minimal in a decentralized structure, visibility into IT investments across business units and divisions, and adherence to a common and consistent process, is critical.