Abstract
Firms achieving above industry average returns from IT investments
must be making consistently better IT-related decisions. Effective
IT governance is one of the ways these firms achieve superior returns.
Many firms are creating IT governance structures that encourage the
behavior leading to achieving the firm's business performance goals.
We define IT governance as specifying the decision rights and accountability
framework to encourage desirable behavior in the use of IT. Effective
IT governance requires careful analysis about who makes decisions
and how decisions are made in at least four critical domains of IT:
principles, infrastructure, architecture, and investment and prioritization.
We studied the use of IT in large multi-business unit firms in the
USA and Europe and found that the typical firm governs IT by following
generally accepted guidelines with broad-based inputs and tightly
controlled decision rights. However, top-performing firms governed
IT differently with governance structures linked to the performance
measure on which they excelled (e.g., growth). Designing an effective
IT governance structure requires understanding the competing forces
in a large organization and creating harmony among business objectives,
governance archetype and business performance goals. An effective
IT governance structure is the single most important predictor of
getting value from IT.<p>(Cont.) To help understand and design more
effective governance, we propose an IT governance framework that
specifies how decisions are made in the key IT domains. The framework
harmonizes desired governance archetypes (i.e., monarchy, feudal,
federal and anarchy) and a series of governance mechanisms (e.g.,
committees, approval processes and organizational forms). The framework
is illustrated with effective IT governance at State Street Corporation.
Effective IT governance encourages and leverages the ingenuity of
all the firm's people in using IT, not just the leaders, while still
ensuring compliance with the firm's overall vision and principles.
In short, don't just lead, govern! Keywords: IT, Governance, IT Governance.
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