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February 20, 2006

A Comprehensive Governance Framework

Why Governance?

Institutional control is a matter not only of doing things "correctly" but doing the proper things correctly. And, we want to control the institution in a way that is itself institutionalized -- just as a mature person would normally control themselves in accordance with appropriate principles of behavior that should be habits of character.

But what is it about an organization that particularly needs governing?

If the organization is a "business", then the motives of a business will drive organizational activity and the point is to steer those activities in principled ways that actually help the business.

The framework below sets the high-level business motives (across the top) as the outlook on key focal-points of the organization's management.

One set of points -- competency, policy, and strategy -- together describe the organization's makeup stretching from what it knows how to do on over to what it should do and finally what it has decided to do. In effect, this describes the current predisposition that the organization brings to its work every day.

The other set of points -- strategic development, operational availability, and transactional consistency -- summarize the organization's major proactive mechanisms for generating "delivery of value" to stakeholders. This is more like the organization's position (not to be confused with positioning).

The balancing act between the organization's predisposition and its position can be seen as a basic behavioral phenomenon demonstrating what the organization knows about how to translate its potential into reality. (Of course, this should include some consideration of whether the current potential is desirable and/or needs changing.)

Given those two axes, the framework looks at the internal structure of the organization for the key contributors that govern relevant business activities -- that is, what it actually winds up doing.

A key observationof the framework is that the organization's capacity to respond to opportunity and demand is hugely shaped by the coherence of its governance. While a lack of governance does not preclude notable capacity, the exact lesson learned in business between 2001 and 2006 is that risk factors in responsiveness can make existing capacity more of a liability (dot.bombs, Enron, etc.) than a benefit. This makes the influence of governance a major force to be leveraged in value management.

At the high level, this is referenced through the framework by its correspondence of the organization's processes, services and portfolios to the goals for progress, production, and achievement.

Naturally, real organizations are not governed only in terms of the intersecting issues presented here. However, governance must attempt to identify the most critical types of decisions to attend to at the various locations and levels of the organizational structure. A primary objective of the framework is to describe the sources and flow of information that can sufficiently account for the effectiveness of the organizational structure.

In that regard, a management ability (BPM) to associate competency and policy exploits certain types of information that can organize appropriate behavior. In like fashion, an ability (BI) to discover and exploit value-laden opportunities for that type of behavior keeps the governance in service to the goals of the business.

The final note for this introductory discussion is that the framework is intentionally abstract so as to allow it to be applied to organizational units of widely differing scale and flavor. There is no reason why a small business unit would have less of a need for governance, and no logical reason why the essential points of governance would be different. Instead, the most likely difference is in the level of awareness that the business unit has about what kind of opportunity governance would bring to the unit if successfully instituted. This is not intended to make any point about the intricacy of particular best practices in governance applied and distinguished between "corporate" or "IT", "profit" or "non-profit", and so forth. Those practices are rightfully derived from the communications needs held by stakeholders in the responsibilities that distinguish their domains from each other. Yet the framework presented above argues for the similarity of management across those domains, and calls out for a certain breadth of awareness that is about explaining why control becomes valuable.

For a related discussion of IT Governance in particular, see the article Surveying IT Governance by clicking here.

For an in-depth discussion of related value-creation issues, click here to see the article, The Business Creation of IT Value, which looks at how business management takes the organizationof IT and develops it to support the business position. While this is not strictly an example of implementing governance in IT, as a followup to the discussion here it illustrates how the problem of "Business-IT alignment" works out in overlapping areas of governance and resource optimization.

Indeed, if we look at coordinating the issues of managing organizational behaviors and resources, we return to the earlier observation that there is a correspondence of the organization's processes, services and portfolios to the (governed) goals for progress, production, and achievement. Seeing "IT" as a corporate resource, the correspondence might be articulated (see illustration here) as an allocation of IT organization responsibilities to those three aspects of the business position.

The thought it leaves us with is the question of how running IT "for" the Business relates to running IT "as" a business, and how business governance and business strategy connects to IT governance and IT strategy. From the framework introduced in this discussion, the indication is that strategy is an area in which governance has an influence -- and that influence is likely to shape Business objectives in ways that IT's influence will have to respect. Thus, IT's own governance will have to establish IT's business-like predisposition and position for compatibility with the way the Business's objectives are meant to be addressed.

Posted by Malcolm Ryder at February 20, 2006 1:27 PM

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