Governance often fails not because of lack of intention but because of poor execution.
The Challenge
- New agile operating models and work practices are changing how decisions are being made.
- Customer expectations and demand for IT resources are increasing, but IT capacity is not.
- Decision rights are not clearly defined, and accountability is not well understood.
- It is difficult to allocate time and resources to build or execute governance effectively.
- The business landscape is evolving fast, introducing increased uncertainty and volatility.
Common Obstacles
- The business value of governance is not well understood across the organization.
- Risk appetite is not defined or in place, preventing risk-based decisions.
- There is not a standard approach to project prioritization.
- Governance activities are not transparent or measured.
- Not enough time is spent preparing for and holding effective meetings, leading to disengagement.
Recommendations
Optimize the governance model to meet the changing needs of the organization.
- Assess the current state to understand challenges and alignment with strategic direction.
- Transition your governance to accommodate new work practices, operating models, or business scope.
- Support your governance framework with strong processes to enable effective decision – making.
What is governance?
IT governance is a critical and embedded practice that ensures that information and technology investments, risks, and resources are aligned with the best interests of the organization and produce business value. Governance must actively adapt to changes in your organization, environment, and practices or it will drive you to failure. Effective governance ensures that the right technology investments are made at the right time to support and enable the organization mission, vision, and goals.
Five Key Outcomes of Good Governance
- Strategic Alignment: Technology investments and portfolios are aligned with the organization’s strategic objectives.
- Risk Optimization: Organizaional risks are understood and addressed to minimize impact and optimize opportunities.
- Value Delivery: IT investments and initiatives deliver their expected benefits.
- Resource Optimization: Resources (people, finances, time) are appropriately allocated across the organization for optimal organizational benefit.
- Performance Measurement: The performance of technology investments is monitored and used to determine future courses of action and to confirm achievement of success.
Outcomes of Ineffective Governance
Ineffective governance leads to poor business outcomes such as:
- Inability to Execute: Without proper governance, there are inadequate checks and balances in executive decision-making, and high levels of technical debt.
- Resource Capacity and Talent Issues: Ineffective governance can lead to resource and investment decisions that are not transparent of aligned to business value.
- Regulatory Infraction: When an effective governance structure is not in place, there can be underdeveloped capabilities in the second and third line of defence.
- Declining Revenues and Margins: Without proper governance, there is an inability to adapt culture to support innovation.
- Risk Event: Ineffective governance is often associated with a lack of integrated and real-time risk management, insufficient, data and data-related capabilities, and poorly understood third-party relationships.
- Rating Downgrade or Drop in Share Price: Without effective governance, specialist teams are more likely to operate in silos.
Stages of Governance
- Ad Hoc Governance: Governance that is not well defined or understood within the organization. It occurs out of necessity but often not by the right people or bodies.
- Controlled Governance: Governance focused on compliance and hierarchy-based, authority-driven control of decisions. Levels of Authority are defined and often driven by regulatory requirements.
- Agile Governance: Governance that is flexible to support different needs and quick response in the organization. This stage of governance is driven by principles and delegated throughout the company.
- Automated Governance: Governance that is entrenched and automated into organizational processes and product/service design. Empowered and fully delegated governance to maintain fit and drive organizational success and survival.
Top-Down vs. Bottom-Up Approach
Although a bottom-up strategy can drive changes to internal culture and attitude toward risk and the value of enterprise decision-making, a top-down executive-driven strategy will ultimately lead to improved decision-making and more successful business outcomes.
Top-Down
An executive-driven strategy is the optimal route for governance and enterprise decision-making, enabling:
- Strong strategic alignment and benefits realization.
- Clear accountability and quicker responses to escalated issues.
- More effective resource optimization.
- Greater visibility of IT issues, risks, and decisions.
Bottom-Up
A bottom-up strategy may help to:
- Drive changes in internal culture and attitude toward risk and decision-making.
- Improve resource optimization and decision-making at the IT level.
While this strategy may help IT teams in certain areas where insight into the big picture is lacking, it will ultimately fail over time to achieve optimal governance outcomes.
Drive Success and Value with Governance
When governance is adaptable and automated, it drives success and value. Governance adaptiveness ensures the success of digital organizations and modern practice implementation. In order to ensure governance is adaptable, follow the steps outlined below.
Establish Your Guiding Principles: Define and establish the guiding principles that drive your organization toward success.
Select and Refine Your Model: Identify governance models that are similar to the way your organization is structured and confirm your current and future placement in governance execution.
Identify Model Update Triggers: Adjust the model based on industry needs, your principles, regulatory requirements, and future direction.
- Principles: Select principles that allow the organization to be adaptive while still ensuring that governance continues to stay on course with pursuing its guiding star.
- Responsibilities: Decide on the governance responsibilities related to: Oversight Level, Strategic Alignment, Value Delivery, Risk Optimization, Resource Optimization, and Performance Measurement:
- Structure: Determine at which structural level governance is appropriate: Enterprise, Strategic, Tactical, or Operational.
- Policies: Confirm any governing policies that need to be adhered to and considered to manage risk.
- Membership: Identify the Responsibility & Accountability of those who should be involved in the governance processes, policies, guidelines, and responsibilities.
- Processes: Establish processes that will enable governance to occur.
Determine Automation Options and Decision Rules: Identify where to embed or automate decision making and compliance and what is required to do so effectively.
Benefits
Effective governance can yield both IT and business benefits.
IT Benefits
- Stronger, traceable alignment of IT decisions and initiatives to business needs.
- Better support and enablement of innovation – removing constraints and barriers.
- Optimized governance that supports and enables modern work practices.
- Increased value generation from IT initiatives and optimal use of IT resources.
- Better understanding of the supporting processes needed to execute your governance system.
Business Benefits
- Clear, transparent focus of IT initiatives on generating strategic business value.
- Improved ability to measure the value and contribution of IT to business goals.
- Alignment and integration of business/IT strategy.
- Optimized development and use of IT capabilities to meet business needs.
- Improved integration with corporate/enterprise governance.
