A Matrixed Approach to Designing IT Governance

04/11/2023국민대학교 비즈니스 IT전문대학원 차상민 ([email protected])

IT Governance

Weill, P. and Ross, J., (2005)

‘A Matrixed Approach to Designing IT Gover-nance’,

MITSloan Management Review,

Vol. 46, No. 2, pp.26-34

정보자원관리론 1 / 43

국민대학교 비즈니스 IT전문대학원 차상민 ([email protected]) 04/11/2023

About the Research (pp.28)

This article is based on two studies.

1. 전 세계 256 개 영리 및 비영리 기업 설문조사 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 CISR 에 의하여 경영 프로그램

참가자들에게 조사를 실시 Gartner 는 IT governance 에 대한 10 가지 사례연구를 통해 이

연구에 공헌



About the Research (pp.28)

This article is based on two studies. (continued)

2. 대기업들에 대한 40 개 면접 기반 사례연구 세트 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 demon-strable success designing, communicating and re-fining 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, imple-

ment, and communicate IT governance processes, com-panies 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.정보자원관리론 5 / 43


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


국민대학교 비즈니스 IT전문대학원 차상민 ([email protected]) 04/11/2023정보자원관리론 7 / 43


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 , 자기자본수익률 , 시장자본총액도 높다 .

But, superior governance performance ≠ superior finan-cial 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 relation-ships

IT governance overlaps with other enterprisewide governance processes.



How Key IT Governance Deci-sions Are Made



1. 5 decision domains for IT governance

IT 거버넌스의 다섯 가지 주요 의사결정 영역1. IT principles2. IT architecture3. IT infrastructure4. Business application needs5. Prioritization and investment decisions

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 decentralized1. Business monarchy – the most centralized approach2. IT monarchy3. Federal system4. IT duopoly5. Feudal system6. Anarchy – the most decentralized approach



2. Six archetypal approaches (cont.)



3. United Parcel Service of America Inc.

UPS’s governance arrangements1. Reflection the company’s commitment to offering total2. Integrated solutions for customers’ global commerce

needs

Senior management accountability for principles and investment decisions

IT 이슈를 기업의 전략적 의사결정 절차와 통합 CIO 는 principles and investment decisions 를 IT architec-

ture and infrastructure 로 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 cor-porate 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

3 가지 거버넌스 메커니즘1. Decision-making structures2. Alignment processes3. Formal communications

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 deci-sions and their implementation

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

IT 로 발생한 비즈니스 가치에 대한 공식적인 추적은 기업이 완성한 프로젝트에 대한 자금 회수를 결정하도록 강화하며 , 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

UPS 의 4 가지 거버넌스 조정 메커니즘1. An IT steering committee2. An IT governance committee3. A formal “charter” process4. An escalation process These four mechanisms clarify processes and account-

abilities so that individuals throughout the company can make decisions that result in desirable behavior as de-fined 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 ap-proaches.

Effective IT governance should be evident in busi-ness-performance metrics.

Top-performing companies govern significantly dif-ferently from other companies.



1. Centralized Approaches and Profitability

The most profitable companies tend to be central-ized 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 organiza-

tional learning Before, IT at UNICEF supported administrative tasks at

HQ, but the field offices. In the mid-1990s, the organization equipped remote loca-

tions 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 in-novation and time to market. They insist on local accountability. Maximizing responsiveness to local customer needs Minimizing constraints on creativity and business unit au-

tonomy

Manheim Auctions: B2B car auctions In the late 1990s, Manheim introduced online auction ca-

pabilities. Manheim Interactive: an independent business

unit The company focused on managing projects for rapid de-

velopment.



2. Decentralized Approaches and … (cont.)

Menheim 의 변화 Menheim’s decentralized approach to IT governance al-

lowed 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 at-tempt to balance the contrasts between gover-nance for profitability and governance for revenue growth and innovation. They focus on using shared services to achieve either re-

sponsiveness 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 de-

sign.



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 represen-

tatives 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, in-

frastructure 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 facilitat-

ing development and reusing of business process mod-ules. The outcome of the selection process is a global standard. The arrangement supports the enterprise’s desirable behav-

iors.




Carlson Companies Inc. Traditionally, each Carlson operating group functioned in-

dependently 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 deci-sion-making structures. CTAC EAO IT Council CSSB and Investment Committee






Recommendations to Guide Ef-fective 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 gover-nance processes to use as a starting point in de-signing IT governance.



The Tennessee Valley Authority It piggybacked its IT governance on its more mature busi-

ness governance mechanisms. The TVA’s governance included a project review commit-

tee.

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

In order to use the framework effectively, man-agement 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 au-tonomy.

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

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



2. Establish the role of organization struc-ture

Companies eventually pursued both centralization and decentralization simultaneously.

By establishing organizational priorities for auton-omy and synergy, companies can introduce orga-nizational designs and incentive systems.

Governance processes – and related incentives – can then compensate for the limitations and in-stability 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 be-haviors without requiring reorganization.

Governance mechanisms can provide organiza-tional stability by demanding disciplined pro-cesses.

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 busi-ness 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 organi-zational 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 se-nior management participation in high-level IT manage-ment.



Fine.

Thanks for concentration!

You will see the slides online.
