What are the biggest mistakes that companies make when it comes to governance? The essence of great governance is to invest wisely and deliver maximum value from investment decisions within the context of taking calculated market risks.
According to Gartner's CIOs' Frequently Asked Questions About Governance, the four biggest and most common mistakes that companies make in governance are:
Understanding Governance: Included in the definition of "governance" are activities that are good IT management practices but are not governance activities. Governance decisions involve investment and risk. Most frequently, governance decisions involve the movement of money. Once those decisions are made, everything after that is management and execution.
The Wrong People: Engaging the wrong people in the governance process, which prevents great governance decisions from being made. When the wrong people are involved in governance, it can create confusion across the enterprise. There is a false sense of who owns a decision or an outcome, and when the money doesn't follow the investment decision, the others impacted by the decision are confused and at a standstill.
Lack of Governance Charter: Charters help governance groups stay focused on the group purpose and help measure success. For organizations that are using governance groups to govern, this foundational item will help define the group, provide structure for the group and provide a backdrop against which success can be measured.
Too Much, Too Little: Applying too much rigor to the process itself, slowing down investment decision making for the enterprise. As outlined in this research, just a few key items are required to govern effectively. Anything else added will require its own process, and the more process there is, the slower the ability to make the best investment decisions possible. It doesn't take much to govern effectively. In fact, when it comes to governance, less is more.
An effective governance program calculates risks around IT investments, and determines how much and which types of risk are acceptable to the enterprise. It positions IT risks within the overall enterprise risk management framework.
An enterprise that takes no risks is an easy target for competitors, while enterprises that are reckless may endanger shareholder value. Typically, projects and programs have different implementation options — each with characteristic benefits, costs, efforts and risks.
Governance drives decisions among the different possibilities, including decisions around a calculated-risk approach — and assesses risks, including compliance, ability to execute against project plans, revenue risk and brand risk.A holistic risk approach is recommended.
Remember, part of the goal of great governance is to improve the quality of IT investment decision making. To achieve this, enterprises need specific types of high-quality information to inform those decisions, and that information must be communicated, according to Gartner.
Great governance can be managed with a few strategic communication tools:
Governance charter. It outlines the purpose of the governance, who is involved, what decisions will be made and how value will be measured. It provides the foundation from which governance continues to evolve. A charter exists in organizations that create a formal structure to govern. That is not always necessary, particularly in family-owned businesses or smaller organizations where ultimate decision-making authority is clear.
A framework for decision criteria. This is the business case criteria for all potential IT investments regardless of size, and includes strategic value and "hard dollar" cost-benefit analysis, and risk analysis to compare all investment proposals in the same way.
A mechanism to track and estimate resources, which is factored into all investment decisions. In sound governance, all resources — including money, staff time (IT and non-IT), vendor time and ability to execute — are factored in as part of the cost-benefit discussion. Enterprises that approve IT investments without considering their ability to resource them make weaker investment decisions than those that make this a routine part of decision making.
Strategy and governance are arguably the two most important processes that any organization will have; unfortunately, most enterprises do not govern well. More often than not, when formal governance is introduced into the enterprise, the process is unclear, inflexible and cumbersome.
As a result, the enterprise negatively responds to this new level of bureaucracy, stripping the organization of the true benefits that governance delivers.