A Matrixed Approach to Designing IT Governance

IT Governance

Weill, P. and Ross, J., (2005)
‘A Matrixed Approach to Designing IT Governance’,
MITSloan Management Review,
Vol. 46, No. 2, pp.26-34

정보자원관리론
국민대학교 비즈니스IT전문대학원 차상민 (skykids@skykids.kr) 2009-04-04 1 / 43

About the Research (pp.28)

This article is based on two studies.


전 세계 256개 영리 및 비영리 기업 설문조사
1.
How large enterprises across a wide range of industries – both

for profit and not – govern IT?
MIT Sloan’s center 개발 (2001)

Gartner Inc.의 EXP 그룹 회원과 CISR에 의하여 경영 프로그램

참가자들에게 조사를 실시
Gartner는 IT governance에 대한 10가지 사례연구를 통해 이 연구

에 공헌


About the Research (pp.28)

This article is based on two studies. (continued)


대기업들에 대한 40개 면접 기반 사례연구 세트
2.
IT Governance in the context of organizational changes

Enterprise Resource Planning implementations

e-Business initiatives

Enterprise Architecture development

IT-enabled organizational transformations


CISR 연구자들과 제휴사들에 의해 개발

To understand how top-performing enterprises governed IT

통계학적 방법과 정성적 방법을 이용하여 데이터를 분석



Proposition
Effective IT governance certainly doesn’t happen

accidentally. But companies that have followed the steps
enumerated above have had demonstrable success
designing, communicating and refining IT that creates
real business value in their enterprises.


Without formal IT governance

Individual managers are left to resolve isolated issues.

Those individual actions can often be at odds with each other.


Proposition

IT governance is a mystery to key decision makers.


Senior managers

When senior managers take the time to design, implement, and

communicate IT governance processes, companies get more
value from IT.
Effective IT governance doesn’t happen by accident.

Senior management awareness of IT governance is the single

best indicator of its effectiveness.

IT 거버넌스의 기업 또는 사업별 효과 측정의 목표

Cost-effectiveness

Asset utilization

Business growth

Business flexibility



측정 결과

상대적인 중요성에 따라 가중치를 주고 측정한 결과 종 모양 형태를

띄며 모두 다르게 나타남
High IT governance performance correlated with the achievement

of other desired measures of success.
효과적으로 정보 기술을 관리하는 기업은 유사한 전략을 추구하는

다른 기업에 비해 20% 높은 이익을 얻고 있으며, 자기자본수익
률, 시장자본총액도 높다.
But, superior governance performance ≠ superior financial

performance
The two measures correlate quite well.



Effective governance

Alignment IT investments with overall business priorities

Determination who makes the IT decisions

Assignment accountability for the outcomes


IT is inextricable from other key enterprise assets.

Such as financial resources, human resources, intellectual

property, physical structure and organizational relationships

IT governance overlaps with other enterprisewide

governance processes.


How Key IT Governance
Decisions Are Made


1. 5 decision domains for IT governance
IT 거버넌스의 다섯 가지 주요 의사결정 영역

IT principles
1.
IT architecture
2.
IT infrastructure
3.
Business application needs
4.
Prioritization and investment decisions
5.

의사 결정 영역의 수준

기업차원

사업단위

기능적 수준

위 세 가지의 적절한 조합



1. 5 decision domains of IT governance (cont.)


2. Six archetypal approaches
Six archetypal approaches to IT decision making

Ranging from highly centralized to highly decentralized

Business monarchy – the most centralized approach
1.
IT monarchy
2.
Federal system
3.
IT duopoly
4.
Feudal system
5.
Anarchy – the most decentralized approach
6.


2. Six archetypal approaches (cont.)


3. United Parcel Service of America Inc.
UPS’s governance arrangements

Reflection the company’s commitment to offering total
1.
Integrated solutions for customers’ global commerce needs
2.

Senior management accountability for principles and

investment decisions
IT 이슈를 기업의 전략적 의사결정 절차와 통합

CIO는 principles and investment decisions를 IT architecture and

infrastructure로 변환

Business unit projects

Delivered in the context of business and IT principles



3. United Parcel Service of America Inc. (cont.)
Business unit projects

Delivered in the context of business and IT principles

Defining business application needs in a way that both enhances

business unit performance and supports corporate objectives.

동시다발적 진행

Creating strategic control at the top of the company

Empowering decision making at multiple organizational levels


Senior management

Works to make IT governance transparent



Governance Mechanisms


1. Decision-making structures
3가지 거버넌스 메커니즘

Decision-making structures
1.
Alignment processes
2.
Formal communications
3.

의사 결정 구조의 역할

The organizational committees

Roles that locate decision-making responsibilities



1. Decision-making structures (cont.)
Each archetypes

Anarchies require no decision-making structures at all.

Feudal arrangements rely on local DM structures.

Monarchy, federal or duopoly arrangements demand DM

structures with the representation and authority.


2. Alignment processes
Management techniques for securing widespread and

effective involvement in governance decisions and their
implementation

IT 투자 제안 과정은 IT 프로젝트를 정의하고, 정밀하게

조사하고, 그것에 우선권을 주는 단계를 묘사한 것이고,
어떤 프로젝트에 투자할 것인지 결정하는 것이다.

IT로 발생한 비즈니스 가치에 대한 공식적인 추적은 기업

이 완성한 프로젝트에 대한 자금 회수를 결정하도록 강
화하며, 그것은 기업이 의도한 수익을 만들어내는가에
초점을 두도록 한다.


3. Formal communications
A huge barrier to effective governance

Lack of understanding about

How decisions are made.

What processes are being implemented.

What the desired outcomes are.


Management can communicate in a variety of ways

General announcements

The institution of formal committees

Regular communication from the office of CIO or the office of IT

governance
One-on-one sessions

Intranets

So on…



3. Formal communications (cont.)
More communication = more effective governance


Well-designed, well-understood and transparent

mechanism

UPS의 4가지 거버넌스 조정 메커니즘

An IT steering committee
1.
An IT governance committee
2.
A formal “charter” process
3.
An escalation process
4.
These four mechanisms clarify processes and accountabilities so

that individuals throughout the company can make decisions that
result in desirable behavior as defined at UPS.


How Top Performers Govern


There is no single best model of IT governance.


Governance arrangements can vary from more

centralized approaches to more decentralized
approaches.

Effective IT governance should be evident in business-

performance metrics.

Top-performing companies govern significantly differently

from other companies.


1. Centralized Approaches and Profitability
The most profitable companies tend to be centralized in

their approach to IT governance.
Their strategies emphasize efficient operations.

Low business costs

A high degree of standardization


Key mechanisms include

Executive committees for decision making

Centralized processes for architecture

Enterprisewide IT investment decision processes

Formal post-implementation assessments of IT-related projects



1. Centralized Approaches and … (cont.)
UNICEF

Its emphasis on cost-effectiveness and rapid organizational

learning
Before, IT at UNICEF supported administrative tasks at HQ, but

the field offices.
In the mid-1990s, the organization equipped remote locations with

IT services.
The result was improved global knowledge, information flow,

transparency and communication.


2. Decentralized Approaches and Growth
The fastest-growing companies are focused on

innovation and time to market.
They insist on local accountability.

Maximizing responsiveness to local customer needs

Minimizing constraints on creativity and business unit autonomy


Manheim Auctions: B2B car auctions

In the late 1990s, Manheim introduced online auction capabilities.


Manheim Interactive: an independent business unit

The company focused on managing projects for rapid

development.


2. Decentralized Approaches and … (cont.)
Menheim의 변화

Menheim’s decentralized approach to IT governance allowed the

company to innovate and grow its business base.
As became the large company, it identified a need for more

centralized architecture and reusable infrastructure services.
IT governance has transitioned to a blend of centralized and

decentralized arrangements.


3. Hybrid Approaches and Asset Utilization
Companies seeking optimal asset utilization attempt to

balance the contrasts between governance for
profitability and governance for revenue growth and
innovation.
They focus on using shared services to achieve either

responsiveness to customers or economies of scale – or both.

Asset utilization demands a hybrid approach to

governance.
It’s leaders rely on duopolies and federal governance design.



3. Hybrid Approaches and Asset … (cont.)
Those mechanisms include

High-level business-IT relationship managers

Service-level agreements

IT chargeback

IT leadership teams comprising business unit IT representatives

Enterprisewide business process teams with IT members


It clearly demands a great deal of management attention.



ING DIRECT

Taking a hybrid approach to IT governance

Each country unit operates autonomously.

The units share a common business model.

The key mechanism is the Information Technology and Operations

Council
The Council makes enterprisewide principles, architecture,

infrastructure and investment decisions.
The enterprise allows IT capabilities to influence business strategy just

as strategy influences IT.
It looks to its local businesses for innovations for facilitating

development and reusing of business process modules.
The outcome of the selection process is a global standard.

The arrangement supports the enterprise’s desirable behaviors.



Carlson Companies Inc.

Traditionally, each Carlson operating group functioned

independently and competed with other operating groups.
In 2000, chairman and CEO Marilyn Carlson sought to change that

competitive relationship to a collaborative one.
CIO articulated two key principles.

Application development could continue to take place within operating

groups.
Carlson would have a shared IT infrastructure.


Carlson assigned governance responsibilities to five decision-

making structures.
CTAC

EAO

IT Council

CSSB and Investment Committee



Recommendations to Guide
Effective IT Governance Design


Effective IT governance demands senior managers

To define enterprise performance objectives

To actively design governance to facilitate behavior


Often companies have mature business governance

processes to use as a starting point in designing IT
governance.


The Tennessee Valley Authority

It piggybacked its IT governance on its more mature business

governance mechanisms.
The TVA’s governance included a project review committee.


Companies can use the one-page framework of IT

governance to help design structures and processes that
enhance their strategic use of IT.

In order to use the framework effectively, management

teams must first establish the context for IT governance.


1. Identify the company’s needs …
IT governance design should encompass four steps.


Identify the company’s needs for synergy and autonomy.


Management teams should consider realistically both the

benefits and cost of such synergies.

Synergy-autonomy trade-offs force senior managers to

make tough decisions and communicate those decisions
throughout the enterprise.


2. Establish the role of organization structure
Companies eventually pursued both centralization and

decentralization simultaneously.

By establishing organizational priorities for autonomy and

synergy, companies can introduce organizational designs
and incentive systems.

Governance processes – and related incentives – can

then compensate for the limitations and instability of the
organizational structure.


3. Identify the desirable IT-related behaviors
Identify the desirable IT-related behaviors that fall outside

the scope of organizational structures.

New governance mechanisms can force new behaviors

without requiring reorganization.

Governance mechanisms can provide organizational

stability by demanding disciplined processes.

Even if organizational structures emphasize the

autonomy of individual business units, a company can
establish IT architecture principles that limit business unit
technical choices and achieve cost objs.

3. Identify the desirable IT-related … (cont.)
IT investment decision processes can direct business

unit priorities toward enterprise priorities by approving
only projects that support enterprise strategies.

Dual incentives are necessary in most companies to

motivate senior-level managers to focus on both
enterprisewide and business unit goals.


4. Thoughtfully design IT governance
When the objectives of IT governance are clear,

companies can design IT governance by outlining
governance arrangements, and then specifying the
mechanisms that will implement the intended
arrangements.

Companies that have not been effective in using IT

strategically should expect to invest in organizational
learning.


4. Thoughtfully design IT governance (cont.)
Dow Corning Corp.

In the mid-1990s, the executive committee met regularly for

several years to redefine
the role of IT

articulate the role of the CIO

establish architectural principles

outline key projects

Closely manage IT investment priorities


The ability to reduce the size of the steering committee, indicated

that Down Corning had created sustainable senior management
participation in high-level IT management.


Fine.

Thanks for concentration! 

You will see the slides online.


A Matrixed Approach to Designing IT Governance

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