By Dan Feely
Overview
Innovation was the hot topic of 2006, and “Governance” seems to be vying for top attention for many organizations in 2007. Due to the volume of acquisitions, divestitures, centralization and decentralization activity, nearly every organization we talk to and work with is exploring new models in IT, Finance, HR, Legal, Real Estate and other shared service areas. TSI defines Governance as follows – the determination and implementation of decision-making processes, policies and accountabilities across various constituencies to achieve improvements in Cost, Quality, Service and Speed.
A recent study by MIT showed the links between business strategy, governance arrangements and financial performance in 20+ in depth case studies and using data from a survey of 256 enterprises in 23 countries. The study found firms with superior IT governance had more than 20% higher profits than firms with poor governance given the same strategic objectives. These top performers have custom designed IT governance for their strategies and identified the different IT governance arrangements these high performers used.
The purpose of this article is to share thoughts pertinent to the establishment and implementation of governance and/or shared service models in nearly any functional area. For illustrative purposes, this content is focused on IT governance.
Background and Context
It is no surprise why Executives are in such a pursuit for Governance. As indicated above, the benefits can be very material and tangible and not just in monetary terms. We suggest that effective IT governance and a good reseller hosting uk are critical for business success and provides the following benefits:
- Formalizes IT oversight and accountability to ensure more effective and ethical management.
- Improves planning, collaboration, communications and performance between the Business Units and IT Groups and within IT Groups (across silos).
- Improves technology ROI as well as reducing the Total Cost of Ownership while making better (i.e., more fact-based, comprehensive and higher quality) decisions to analyze, prioritize, fund, approve and manage major IT investments (capital and operating expenses).
- Improves clarity of IT’s overall priorities through an established prioritization process…..)
- Effectively positions IT to enable business strategy and improve overall profitability)
- Formalizes the selection, contract administration and management of vendor/outsourcing initiatives. Optimizes assets and human capital resources.
- Advances organizational effectiveness and maturity.
- Facilitates compliance and audits (e.g. SOX, FDA, etc.) by documenting processes, controls and decision authority.
Governance is on nearly every forward-thinking executive’s radar screen. As many organizations have centralized, decentralized, acquired and/or divested other organizations in recent years, the resulting shared services functions including IT, HR, Finance, Legal and others are frequently fragmented and, in some cases, do not properly support the business needs.
However, in the spirit of expectation management, be aware that Governance is not small or simple feat:
- IT governance can bedifficult to get right but it is worth the effort – good governance has a big payoff and bad governance a steep cost.
- IT governance is not just about control, risk management and compliance – it should also empower performance and innovation.
- Finding the right IT governance model is a moving target.
- The critical question regarding governance is who should make what decisions.
- The factors that affect governance vary – there is no one best model.
- IT governance is complex – don’t expect easy solutions or cookbook approaches. Governance needs to be a mechanism to promote dialogue between IT and the business, not a substitute for it.
- Good governance is the result of both intelligent design and evolutionary learning.
- Governance bodies must play four key roles: auditing, supervising, coaching and steering.
The model below illustrates how various domains need to work together across the entire Enterprise while including Risk Management and a host of other critical domains.
TSI’s Approach
1. TSI often takes a facilitated approach that involves many of the involved key thought leaders and players to discuss and analyze:
- Role of Shared Service Organization (e.g., IT) – Understanding the role IT and the PMO does and should play in the organization. Is it only for technology projects? What is the value of IT to your company? How do you demonstrate and defend IT’s business value? … IT Infrastructure … Qualitative “soft” benefits … Quantitative “hard” benefits … Business Risk What are the critical processes required to achieve greater value from IT? How does the CIO discuss the value of IT with the CEO and the executive team? What strategies and approaches are most effective?
- Perception – how do key constituents view and value the Shared Service Organization (SSO)?
- Value Delivery – how is value delivered? How is it measured? How is it paid for?
- Organization Structure – who reports to whom today? What “dotted line” relationships exist? How are performance appraisals given and what local versus enterprise bonuses and consequences are in place/should be in place?
- Core Competencies – share skills exist at various parts of the organization and how do those compare to what is needed now and what will be needed going forward?
2. Benchmarking – how does this environment compare to other leaders both in and outside of this industry?
3. Objective Perspective – what recommendations does TSI suggest and what difference will it make in the context of its strategic plan and other initiatives? Ultimately how can the new “model” improve the following:
- Enablement of the strategic plan
- Key Cost, Quality, Service and Speed Metrics for BOTH business and IT.
Conclusion
We hope this white paper provides you with a sound basis of theconsideration and analysis that should be applied to projects in this area. Please consider calling TSI should your team need any skilled, objective expertise in this area.
For more information please email TSI or call 847-705-0960 ext 202.
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Other TSI News
Len Green, TSI Principal recently had a white paper published in Montgomery Research’s Midmarket Strategies . Congrats to Len and please give it a read – click here to download.
If you are a Crains Chicago Business reader, please keep your eyes open for TSI upcoming ad campaign beginning at the end of December, 2007.
TSI is happy to announce the recent completion of our updated website. We have updated the majority of the content and presented more case studies and other great information. Please check it out – transforming.com
