Part 2: Underlying Causes
Governance as a panacea
Whilst IT governance has come to prominence over the last few years, the current approach to IT governance will not address the question of value. Recent research from UAMS suggests that the focus of IT governance continues to be on the more operational IT issues with little appetite for tackling the business aspects of planning and managing how the business uses IT to create and sustain value. Research undertaken by Cranfield indicates that very few organizations have a structured approach to realizing benefits from their investments in IT and so many boards are left uncertain of the value IT is adding to their enterprises. In a 2006 study they found that less than 30 percent of the largest UK companies actually have a formal benefits management process. Anecdotal evidence suggests that similar figures are to be found among European and US companies as well. My own experience would certainly support this and suggest that this would also be the case on a global basis.
Whilst, as mentioned in the first article in this series, governance is not seen as an exciting topic – it is not easy to change governance in an organization. Governance is about what decisions need to be made, who gets to make them, how they are made and the supporting processes, structures, information and tools – governance is essentially about the power structure of an organization. As such, improving governance in an enterprise is usually itself a major change program – one that will take time to plan and implement, and even longer in many cases for the benefits to be achieved. This does not play well in today’s environment of short-term thinking, driven by “analyst” expectations in the public sector and by political realities in both the private and public sectors. Often, the benefits will not be realized, or generally visible, during the average tenure of the responsible/accountable executive which raises the question “What’s in it for me?”. Such a program can certainly be seen as “all pain and no gain!”
A further complication is that implementing changes to governance is not simply a case of the board and executives directing others in the enterprise to change – it certainly involves doing so but is also about the board and executives themselves changing how they think and act. Many executives have got where they are by understanding and working within the current governance system – they know how to “play the game” and often, as a result, have a strong vested interest in the status quo.
The Knowing-Doing Gap
Where there is understanding of the need to do something, enterprises often then run into the “The Knowing-Doing Gap” as described by Jeffrey Pfeffer and Robert I. Sutton in their book of the same name. As the authors say in their preface, “… so many managers know so much about organizational performance, and work so hard, yet are trapped in firms that do so many things that they know will undermine performance.” They found that ” … there [are] more and more books and articles, more and more training programs and seminars, and more and more knowledge that, although valid, often had little or no impact on what managers actually did.”
In A Short History of Progress, Ronald Wright refers to the work of Joseph Tainter who identified three common elements of the collapse of civilizations: The Runaway Train, the Dinosaur; and the House of Cards. Whilst the collapse of civilizations is clearly much more heady stuff, we can certainly draw parallels to the failure of investments in IT-enabled change, sometimes resulting in business failures and even industry-wide failures. Our adoption of technology is in many ways a runaway train, executive management’s failure to change to tackle the challenge qualifies them as dinosaurs, and major investments, business or industry failures show many investments to be a house of cards.
In the context of realizing value from IT investments, the primary element that we have to deal with here is that of the dinosaur. Again, as Albert Einstein once said, “You cannot solve a problem by applying the same thinking that got you into the problem in the first place.” Traditional governance and management approaches will not tackle the challenges presented by the runaway train that is IT and, unless this problem is recognized and addressed, we will continue to build houses of cards, and suffer the consequences when they fall. Going back to the “Knowing-Doing Gap”, two of the major contributors to this gap are substituting talk for action, and substituting memory for thinking, i.e., falling back on old habits.
Talk is certainly a lot easier than action, and indeed many good talkers are rewarded in enterprises while the doers slog on under the radar. Often, the good talkers become poor managers. This may be one of the factors that lead the late Peter Drucker to remark “Most of what we call management consists of making it difficult for people to get their work done.” I would add to this that in all too many cases our current implementation of governance formalizes this. In a conversation with Tom Peters a number of years ago I once, somewhat tongue in cheek, suggested that in most organizations, 10% of the people get the work done despite the other 90% – his response was “Try 5%!”
As to the second contributor to the “Knowing-Doing gap”, falling back on old habits, one definition of insanity is “doing the same things and expecting different results.” In another book around this topic, The Wisdom of Crowds, James Surowiecki identifies one of the challenges is that we put too much faith in individual leaders or experts, either because of their position or track record, and that these individuals also become over confident in their abilities. I don’t want to question the ability and competence of all leaders or experts – while I certainly have seen my share of bad ones, most are good people doing the best they can. However, in today’s increasingly complex and fast-paced knowledge economy, much of which is both enabled by and driven by technology, it is unrealistic to expect individuals, however good they are, to have all the answers, all the time. The reality is that neither position nor past success is any guarantee of future success.
If organizations are to succeed in today’s knowledge economy, they cannot constrain themselves to the knowledge of a few individuals – to put it a more brutal way, they cannot be constrained by the habits or ego(s) of their leader(s)! Organizations must tap into the collective knowledge of all their people. We need effective governance that reaches out to and involves key stakeholders – retaining appropriate accountability, based on the law of subsidiarity – an organizing principle that matters ought to be handled by the smallest, lowest or least centralized competent authority. This means locating accountability and decision-making at the most appropriate level, while supporting decisions with broader and more knowledgeable input.
Over the last few decades, much has been said and written about empowering the people within an enterprise – unfortunately little of that talk and writing has translated into reality. As James Surowiecki says, “Although many companies play a good game when it comes to pushing authority away from the top, the truth is that genuine employee involvement remains an unusual phenomenon.” As a result of this, information flows up, down and across organizations – are poor, non-existent or “filtered” in all directions, decisions are made by a very few with inadequate knowledge and information, and there is limited buy-in to whatever decisions are made. As Peter Senge says in The Fifth Discipline Handbook,”…under our old system of governance, one can lead by mandate. If you had the ability to climb the ladder, gain power and then control that power, then you could enforce changes… Most of our leaders don’t think in terms of getting voluntary followers, they think in terms of control.”
In the first two parts of this series, I’ve described the problem of the realizing value from today’s increasingly significant and complex investments in information technology, or, more accurately, the transformational change that the use of the technology enables, and, in this article, the underlying causes of the problem. In the third and final article of the series, I describe a path forward, and conclude with a “call to action”.
 Vab Grembergen, W., De Haes, S., & Van Brempt, H (2008). Exploring the relationship between enterprise benefits and IT governance practices COBIT 4.1 and Val T 2.0. Antwerp, Belgium: University of Antwerp Business School, ITAG Research Institute for the IT Governance Institute
 Delivering Value from Information and Technology Investments: Learning from Success (2006), Prof. John Ward, Cranfield School of Management, UK