The value of governing by principles

Governance Boards have established themselves, even this early in their creation, as a vehicle that keeps the various parts of the enterprise making decisions with an enterprise-wide perspective about IT investment.

One of the key reasons this is so is the use of principles.

Principles — short pithy phrases that describe the objectives the Board members have for the Board — become a source to which anyone on the Board can appeal to stop a decision from taking the enterprise off on a tangent.

As an example, picture a reinvestment principle that focuses on fixing an asset portfolio. The organization uses a traffic light metaphor — green for “in good order”, yellow for “a caution is seen” and red for “a real problem”. Their principle is then “reds take priority”.

There will, of course, be other principles in play. But the idea of the Board selecting this principle was to make sure that demands did not push needed renovations off too long. Once a red situation occurs, getting that area of the portfolio out of red status is an enterprise priority.

Apply this to, say, an ERP package. Many different areas of the business use it. Each has their own ambitions for its future. None is willing to fund change that primarily serves others (or deal with the disruption it can cause).

Sound familiar? Now apply that principle “reds take priority” to the problem, when it’s the ERP package that is in the red zone.

Protests that “we can’t handle this now” from one area are met with a “this must take priority”, not from the CIO, but from other business area leaders. Some of those, of course, have ambitions they will want to have filled with this change. Others, though (and this is the track record) will speak up for prioritizing fixing the problem not out of self-interest, but out of enterprise interest.

The more broadly-based a piece of the portfolio is, the more it puts the enterprise as a whole at long-term risk.

Likewise, to make room in the project portfolio of investment for fixing this red problem, something else has to be dropped. It’s not like new resources magically grow on trees, after all.

So the Board likewise will consider two other questions: how much should “reds take priority” take resources that could be used to fulfil the needs and wants of business areas? — and which items out of what’s left available for needs and wants give the enterprise the best options (likelihood of completion to plan, reduction of future risks, value generation possibilities, etc.)

The observed behaviour of Governance Boards is that it is not always the one with the best return on investment business case that gets the nod, but the one that best balances a number of factors. Having learned the need to balance new investment with reinvestment, and to judge risk, these lessons get applied elsewhere.

When the first Governance Board was established, one of the executives that committed to its creation hoped the Board would do the job of creating future executives for the firm: people who would adopt an enterprise-wide view rather than a parochial, functional view. That happened.

A few pithy principles go a long way.

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About passionateobserver

I am a passionate observer of our society, the economy, and politics. Mostly I don't like much of what I see, so I write as a concerned citizen. To the fray, I bring a background in the philosophy of history, a lifetime's reading, a work history in information technology management, consulting and education.
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