Aligning IT to Business Objectives
Information technology is a crucial part of most businesses, but the solutions that come out of IT departments don’t always line up with organizational objectives. That’s when IT strategy and governance must come into play, said David Flint, a research director at Gartner.
“All organizations of any size have IT, and some organizations are spending large amounts of money on IT,” he said. “The decisions on what to spend are made by all kinds of people in various capacities. We know, from both our research and our own contacts with organizations, that a significant part of this money is wasted, or sub-optimally applied, as we might say more pretentiously.”
Flint, who has done extensive research on the topic of IT alignment, has honed in on several reasons why this occurs. “One is that there isn’t any effective linkage between the strategic intent at the top and the people who are actually making the decisions—that’s a failure of strategy,” he said. “The second is that the people who are making the decisions are not the right people. The rights to make the decisions have been handed out in an ill-considered way.”
As Flint pointed out, IT projects and initiatives can end up being a convoluted string of pearls because of this disconnect between different parts of an enterprise. This is hardly unique to IT, though: He cited the example of the voluminous Patriot Act, which was passed by Congress shortly after 9/11. The elements of the thousands of pages in that White House-sponsored bill were not so much written as they were thrown together as an amalgamation of older wish lists of law enforcement and intelligence officials.
Similarly, when the CEO of a company mandates the creation of a particular IT solution, he’ll pass off basic requirements of the initiative down the organization. This will eventually reach line managers, who will add their own ingredients to the pot. “Every middle manager has tucked away in his desk a list of things he’d like from IT but can’t get them to agree to,” Flint said. “When asked what should be in this new system to get closer to customers, he takes out this list of things and says, ‘Funny you should ask me that.’ Quite a lot of things the managers are asking for have to do with making their lives easier, not honoring the strategic imperative that has come down from the top.
“Because all these functions have been added in, the project takes longer and costs more than was expected,” he added. “The chief executive, who really wanted it in six months, is offended that it’s taking 18, and when it goes in, it turns outs it isn’t doing what he expected. It doesn’t really matter whether you call this a strategy failure or a governance failure—the fact is the process that you’ve gone through hasn’t done what it was supposed to do.”
The focus of the research Flint has conducted is around recognition of these kinds of problems and determination of mechanisms that organizations can follow for the construction of an IT strategy that reflects the business’s strategic intent as well as the establishment of governance mechanisms, to make sure the right people are making critical decisions. For example, a conglomerate with various independent units that have little or nothing in common should allow decisions to be made by the separate department heads. On the other hand, a company that essentially has one product or service should try to pull decisions on IT to the center, and harness synergies between departments with similar goals.
“If you’re a centralized organization, recognize that you are central and establish central decision-making,” Flint said. “Establish a close alignment between IT and the business leaders at the center, and let them make the decisions about processes and systems. Then you roll out the processes and systems, and the people operating the business are tasked to operate the processes and maximize the business value they deliver, but not to mess with the system. In organizations where that isn’t done, you have a lot of effort that is wasted with local support of locally customized systems, which is creating nuisance rather than adding value. To a large extent, it’s a matter of what I call ‘management revolution’: understanding that in order to make things happen, someone has to take charge.”
Flint also said that in spite of the disparities in decision-making between the assorted units in a conglomeration, it may benefit these firms to have some collaboration between IT units to share ideas and best practices. In addition, he observed that there are organizations that don’t easily fit into categories of having one objective or many objectives. “In the middle, where you’re looking at trade-offs between local responsiveness and the efficiency of common processes, that is where the governance situation is difficult. That is why we need to continue research efforts—to identify the best practices in that difficult area.”
For more information, see http://www.gartner.com.