CIS 590 IS/IT Policy and Strategy:

The Partnership Rolesof the

CEO and CIO in Governance

GOVERNANCE: WHAT DOES IT MEAN?

QuestionWhat is the meaning of governance, particularly when associated with IT? Is it a function within IT organization or merely a set of practices?

AnswerThe terms "governance" or "enterprise governance" have been widely used for a long time, in many different public and private organizations, to denote the act, process, manner or power of exercising authority and control. During the last few years, governance has been combined with IT more and more frequently, giving IT governance. Everybody (CEOs, CFOs, CIOs, GTOs, etc.) agrees that strategic alignment of business and IT strategies is critical to attain business goals. The appearance of IT governance has essentially been driven by the necessity for IT organization to interact more closely with global enterprises to achieve alignment (see next slide). That is precisely the key contributing role, or raison d'etre, of IT governance.

Governance Interplay: Enterprise and IS/IT

Activities

Governance Governance

ActivitiesEnterprise IS/IT

Exchange Information

Set Control Objectives & Rules

Common PracticesStrategies Strategies

Alignment gap

GOVERNANCES INTERPLAY: ENTERPRISE AND IT

IT governance may be presented as the organizational capacity to control the formulation, valuation and implementation of IT strategy, tightly aligned with business strategy, and as a guide to proper direction for the purpose of achieving the business goals of the enterprise.

Simply put, IT governance is a combination of processes, practices, rules and relationships. IT governance may be exercised according to different models ruled by factors such as organization, culture and existing IT relationships within the enterprise. However, to be effective and successful IT governance has to be practiced in all circumstances, with attitudes favoring negotiation, diplomacy and communication, to be perceived as a true and active facilitator.

When appropriately applied, IT governance brings additional benefits or contributions, such as:• It helps organizations move forward by improving their perceptions of IT, from an enabler of an enterprise's strategy, toward an integral part of a strategy.• It raises the level of mutual understanding with the business.• It brings consistency across the IT organization and enterprise, particularly when acting in a federative or shared mode.

BUILDING THE GLOBAL IT ORGANIZATION:

TWO MODELS, TWO APPROACHES,

TWO CIO LEADERSHIP STYLES

OUR POSITION

Today's companies are running global businesses or trying to make their businesses more global. In response, IT organizations are expected to become more global. Two distinct types of global IT organizations:

1. centralized, in which the global CIO has direct authority over all IT resources, and

2. decentralized, in which IT resources report to local or regional business management. or a global business unit and have "dotted-line" reporting to a global CIO.

The different levels of CIO authority and resources require different leadership styles. In the centralized model, the global CIO retains ultimate accountability over strategy and budgets, project portfolio, staff, major suppliers and senior executive reporting.

In the decentralized model, the global CIO has no direct responsibility over the sometimes numerous local CIOs and their organizations. Here, the only smart way to lead is through a facilitated leadership style, with the CIO creating forums where group CIOs can come together to share best practices, debate issues and agree on common approaches.

PROOF/NOTES

DRIVERS OF GLOBALIZATION1. Businesses are becoming more global.2. Mergers and acquisitions (M&As) have created instant global organizations.3. The Web makes products, services and customers global. .4. Businesses need to contain IT costs.5. There is a trend toward corporate shared services as a way to "force" synergies on very autonomous business units that do little sharing on their own. IT is one of these "shared services."

BENEFITS OF GLOBALIZATION1 .Global technology solutions with worldwide support.2. IT cost containment.3. Operational synergies and innovation through collaboration and knowledge sharing.

ADVANTAGES OF A CENTRALIZED MODELThe centralized model can more easily deliver on the benefits of globalization because of the direct control over all IT resources.

The global CIO of a centralized IT organization is an executive leader who:• Has direct report responsibility over all IT staff.• Sets objectives for his/her direct reports based on the IT strategy, empowers and coaches them.• Retains ultimate accountability over IT budgets and operations, project portfolio, major suppliers and senior management reporting.• Identifies pockets of best practices across the world and works to ensure their worldwide adoption.• Reports into global executive management CEO or CFO).

The typical leadership team composition and other global working groups in a centralized model consists of a global CIO and regional CIOs (in Europe often titled "regional IS director") or a global CIO and business unit CIOs.

ADVANTAGES OF A DECENTRALIZED MODEL

The decentralized model is more suited for businesses that require strong local or regional autonomy or have very heterogeneous business units. This model makes it harder for the CIO to deliver on the potential benefits of IT globalization.

The global CIO of a decentralized IT organization is a skilled facilitator leader who:• Reports into senior executive management (CEO or CIO). .• Has no direct responsibility over IT staff, only a dotted-line reporting relationship (with the exception of a small corporate IT team).• Has a carefully scoped mandate to build a group approach in certain areas of IT: standards and security, telecommunications, global directory, global strategic projects.• Sponsors group CIO meetings and other initiatives to build a common approach in these areas or to identify and catalyze other synergies across IT units.

Typical Teams/Groups• A global CIO who has a small corporate IT staff to support the areas covered by the CIO 's mandate.• A constellation of CIOs of different business units or countries/regions report to business management. They can number up to a few dozen. Each CIO has a different power base and influence level.• A few corporate-sponsored working groups consisting of any mix of group CIOs or senior IT managers in the units, collaborating on areas of common interest.

Organizational Characteristics of Global IT Organizations

Centralized Global IT Organization

Usually consists of three to four regions: the Americas, Europe/Middle East/Africa (EMEA) and Asia Pacific.

Generally a previous centralization wave has yielded regional consolidation of IT units with consolidated reporting into a regional, CIO or regional IT director.

The small leadership team consisting of the global and regional CIOs can agree on IT strategy and management agenda and work together toward its implementation.

There is some disparity across regions in organizational structure and technology platforms.

This organizational model of governance makes it possible to:• Set a global IT strategy and budget• Manage corporate project and supplier portfolios• Allocate IT resources across the world as part of career• development or in response to day-to-day skills requirements• Establish or leverage competence centers anywhere in the

world for design, development, support or operations• Centralize the production of IT executive reports• Foster consistent practices worldwide• Provide staff with inter-regional career development• opportunities

Decentralized Global IT Organization

Large corporations can have a large number of unit CIOs (We counted as many as 50 in one organization)

There is usually no regional consolidation of IT units or IT reporting.

IT staff reports into business unit or country/regional management.

There is wide disparity between the respective IT organizations In size, operational footprint, competence levels, corporate culture, management practices.

ISSUES AND BARRIERS FACED BY CIOs

The main issues for global CIOs of centralized IT organizations are: • the cohesiveness of the IT global leadership team and the individual competence of its members, • the level of customization required by business unit or regional business management and • the real-life difficulty of embedding consistent practices worldwide despite a favorable governance structure.

For global CIOs of decentralized IT organizations, the barriers to effective globalization of IT stem from: • the potentially conflicting business-unit driven agendas and needs of all the local CIOs, • the lack of centralized governance of budgets and staff and • the organizational diversity across business or local units (see Table on next slide).

Issues and Barriers Faced by CIOs

Centralized Global IT Organization

The degree of commitment of each regional CIO to the global strategy and management agenda

The leadership ability of each regional CIO

The degree of customization sought by business unit or regional business management in their technology solutions and services

The degree of organizational heterogeneity ordifferences in corporate culture left over frompreglobalization and/or pre-M&A days

The real-life difficulty of embedding consistentmanagerial and technical practices worldwide

The degree of technological diversity (technology platforms, infrastructure)

The degree of localization vs. the degree ofcommonality in the development of new IT

solutions

Decentralized Global IT Organizations

Potentially competing agendas of the different unit CIOs who represent the priorities of their business management; these priorities are not necessarily aligned across business units or countries

Strong organizational heterogeneity due to the affiliation with different business units or local operating units.

Heterogeneous corporate cultures across units, and technological diversity (platforms, infrastructure).

Difficulty to implement a global IT strategy

Inability to set a corporate IT budget and manage a corporate project portfolio.

Inability to allocate IT resources across the world or to manage suppliers globally.

Inability to centralize the production of IT executive reports since each IT unit reports to its own business or local management

Few incentives to establish or leverage competence centers anywhere in the world

Few levers to foster consistent practices worldwide, and difficulty to provide staff with interregional career development opportunities

RISKS

The two types of CIOs face different risks in their jobs. We've observed two main risks for the CIOs of centralized organizations:

1. not going far enough in the pursuit of technical, managerial and organizational standardization, not fully leveraging their authority and thereby not achieving the full benefits of globalization, and

2. not being tightly aligned with local and regional business management, with a perceived lack of proactivity and responsiveness in meeting needs.

The two main risks for the corporate CIOs of decentralized organizations we've observed include:

1. being too directive in their leadership style by pushing unilateral corporate strategy and decisions, which generates unnecessary push-back from unit CIOs due to the lack of open debate and

2. not being consistent, innovative or bold enough in the creation of frequent forums where all the unit CIOs can come together to work through issues.

CRITICAL SUCCESS FACTORS FOR CIOs

1) Keeping corporate headcount very light, and hiring only outstanding, seasoned and multilingual professionals with excellent interpersonal and facilitation skills.

2) Managing the team tightly is important, since most of what they do has worldwide impact.

3) Setting aside a significant travel and meeting budget for face-to-face interaction and agreement on the mix and role of preferred virtual collaboration media.

Making sure all global projects have the following characteristics:-A global budget with clear contribution from local units or, alternatively, clearly

agreed local budgets.-A global project manager with clear business unit or regional/local unit face-offs.-Cross-regional design and development teams.-Clear process to collect local/regional requirements, validate choices.-Clear resource allocation and accountability for development and rollout.

Chaos results when these rules are not applied to global projects.

CRITICAL SUCCESS FACTORS FOR THECORPORATE ClOs IN THE CENTRALIZED MODEL

Global CIOs of centralized IT organizations will succeed if they take advantage of the centralized governance structure to achieve the full benefits of globalization.

• Maintain a team of regional IT directors:• Set clear objectives for the regional CIOs and corporate staff, empower and coach them, implement consistent and formalized monthly reporting.• Organize frequent working sessions of the global leadership team to build intimacy and trust among the regional IT directors and between them and corporate staff. Quarterly face-to-face meetings and biweekly conference calls allow them to work through issues jointly and review progress on the shared management agenda.

CRITICAL SUCCESS FACTORS FOR THECORPORATE ClOs IN THE CENTRALIZED MODEL

Jointly, with your leadership team of regional CIOs, define a global IT management agenda for the year consisting of managerial and technical tracks:

• The managerial track seeks to achieve global collaboration and consistency in all areas of IT management, including the yearly IT plan, the regional steering committees, project management, balanced scorecard, organizational issues, core IT process improvement, executive reporting and all HR-related issues.

• The technical track addresses global projects, architecture, technology standards, new technologies and innovation, technical efficiencies, security and disaster recovery procedures. This track is led by the corporate senior technical manager and is characterized by the establishment of interregional working groups on these subjects.

Put in place a single budget structure with consistent line-item definitions, similar spending approval process and common tracking of actuals and forecasts. .

SETTING UP A CORPORATE STAFF

Fill the following Corporate Positions at corporate headquarters:

• IT financial controller to help build and manage global and regional budgets.• Project managers to lead global projects such as, Intranet, ERP, data warehouse (unless highly qualified resources exist in the regions, but this is seldom the case).• Architects to facilitate a common architecture definition and technical directors to oversee global infrastructure and act as "hit men" in cases of high-visibility technical problems.• Supplier management to establish the basis for global supplier management.• HR management to support local HR in recruiting, career paths and development.• Optionally, strategy facilitation to prepare and facilitate steering committee meetings, solicit bottom-up strategy inputs from the regions, document strategy.

SETTING UP A CORPORATE STAFF

Working with business and senior management:• Visit the regions frequently (more than 50 percent of the time), bond with regional business management.• Establish a standard and agreed way to justify, prioritize and approve projects worldwide.• Establish effective regional IT steering committees that are managed consistently across regions.• Consolidate regional reporting into a global IT activity report and carefully stage manage that within-the global executive team.• Hire consulting help if a change program is required to embed consistent practices worldwide.

SETTING UP A CORPORATE STAFF

Globalizing the broader IT organization:

• Sponsor the establishment of competence centers in high-impact areas, Competence centers can be of two types:

– operational, where critical activity is entrusted or 'outsourced" to a particular region or set of regional resources (e.g." Web development) and

– knowledge based, with the main objective of achieving consistency and sharing best practices in IT methods or technologies (e.g., project management).

• Cross-fertilize across regions by introducing interregional career paths for senior IT managers and high-potential staff. Move people across as key positions open up or unforeseen challenges call for special competencies. Plan successions for key jobs globally.

CRITICAL SUCCESS FACTORS FOR GLOBAL ClOs IN THE DECENTRALIZED MODEL

Global CIOs of decentralized IT organizations will succeed if they adopt a facilitated leadership style, take a more incremental approach that builds on their wins and focus on relationship building with both unit CIOs and senior business management.

• Adopt a facilitated leadership style for the global CIO, in particular, but also for all corporate IT staff. Avoid the common mistake of adopting the executive leadership style. Facilitated leadership is the preferred leadership style when there is no direct or reporting control over people. This leadership style is characterized by the seeking of true win/win for all parties through conflict resolution, building teams with shared objectives and common approaches, open and honest debate of issues and consensus building instead of parliamentary voting as the preferred group decision-making model. This is the best way to build trust with the unit CIOs.

• Create regular and frequent value-added discussion and decision forums to identify possible synergies and address shared problems.

• Define principles of corporate IT strategic direction and key initiatives but do your best to elaborate the strategy with the full participation of all group CIOs.

• Sponsor only high-impact, high-visibility initiatives within the scope of your mandate (such as worldwide roll outs, articulating a group IT strategy).

CRITICAL SUCCESS FACTORS FOR GLOBAL ClOs IN THE DECENTRALIZED MODEL

• Ensure buy-in from the most powerful unit or local CIOs into IT strategic direction and corporate-sponsored initiatives.

• Respect the autonomy and accountability of the different unit or local CIOs and appreciate their competence and experience..

• If the budget allows, host special value-added events for unit CIOs such as new technology awareness and management development seminars.

• .Lobby business unit and country management to create awareness of the potential for IT synergies and the ensuing benefits.

Over time, after successful delivery of some key initiatives and having built some trust both within senior business management and group, CIOs:

• Should seek to create a group IT management agenda with a set of agreed strategic statements, initiatives and resource commitments that all group CIOs can buy into and work toward.

• Periodically test the readiness of executive management to centralize IT resources and reporting under the authority of the corporate CIO.

Do all of the above in a sincere spirit of service to the operating unit CIOs and any mistakes on the corporate CIO's part will be Quickly forgiven.

FINDINGS

In the centralized model, global CIOs face two main conflicting risks: (1) not achieving the full benefits of globalization by not going far

enough in the pursuit of technical, managerial and organizational consistency and

(2) not being responsive enough to the needs of local and regional business management.

In the decentralized model, global CIOs face two main complimentary risks:

(1) being to directive in their leadership style, which generates unnecessary push-back from unit CIOs, and

(2) not providing frequent and regular forums where all the unit CIOs can come.

RECOMMENDATIONS

There are some common approaches for success in both models. including:• Keep corporate headcount very light, hire only outstanding, seasoned and multilingual professionals.• Set aside a significant travel and meeting budget for face-to-face interaction and agreement on the mix and role of preferred virtual collaboration media.

Make sure all global projects have:• A global budget with clear contribution from local units or, alternatively, clearly agreed local budgets.• A global project manager with clear business unit or regional/local unit face-offs.• A cross-regional design and development team.• A clear process to collect local/regional requirements, validate choices clear resourcing and accountabilities for development and roll out.

RECOMMENDATIONS

Global CIOs in the Centralized Model can achieve the benefits of globalization but must also consider the following:

• Set clear objectives for the regional CIOs with full accountability and appropriate coaching; bring them together face-to-face at least quarterly.

• Define a global IT management agenda for the year consisting of two tracks: managerial and technical.

• Put in place a single budget structure with consistent line-item definitions, similar spending approval process and common tracking of actuals and forecasts.

• Build a small corporate team of multilingual heavyweights in key functions, e.g., financial controller, project managers, senior technical manager, supplier manager, HR manager.

RECOMMENDATIONS

Global CIOs in the Centralized Model can achieve the benefits of globalization but must also consider the following:

• Visit the regions frequently (more than 50 percent of the time) and build strong relationships with .regional business management.

• Establish a standard and agreed way to justify, prioritize and approve projects worldwide (project initiation process).

• Establish effective regional IT steering committees that are managed consistently across regions.

• Consolidate regional reporting into a global IT activity report for the global business executive team.

• Sponsor the establishment of either operational or knowledge-based competence centers in high-impact areas.

• Introduce inter-regional career paths for senior IT managers and high-potential staff.

RECOMMENDATIONS

Global CIOs in the decentralized model should take heed of the following recommendations:

• Adopt a facilitated leadership style and focus on relationship building with both unit CIOs and senior business management.

• Avoid the common mistake of adopting the executive leadership style. Facilitated leadership is the preferred leadership style when there is no direct or reporting control over people. This leadership style is characterized by the seeking of true win/win for all parties and builds consensus.

• Create regular and frequent value-added discussion and decision forums to identify possible synergies and shared problems. Be respectful of local or business-unit constraints and priorities.

• Elaborate the IT strategy with the full participation of all group CIOs. The process will be longer but you'll be able to implement the strategy.

RECOMMENDATIONS

Global CIOs in the decentralized model should take heed of the following recommendations:

• Sponsor high-impact, high-visibility initiatives within the scope of your mandate. Deliver those successfully before trying to expand the scope. Sponsor the creation of working groups on different areas of interest to all IT units (technology standards, security procedures, etc.).

• Ensure buy-in from the most powerful unit or local CIOs into IT strategic direction and corporate-sponsored initiatives. Lead them as a "core team."

• If your budget allows, host special value-added events for unit CIOs such as new technology awareness and management development seminars.

• Lobby business unit and country management to create awareness of the potential for IT synergies and the ensuing, benefits to create a more favorable environment for the unit CIOs.

• Once trust and credibility has been built, test the readiness of executive management to centralize IT resources