Using the balanced scorecard to bring IT governance to light

IT governance has a major impact on business strategy, particularly where great strategic reliance is placed on the IT function developing and delivering complex systems to support corporate direction, policy and external regulations

IT governance has a major impact on business strategy, particularly where great strategic reliance is placed on the IT function developing and delivering complex systems to support corporate direction, policy and external regulations, writes The Birchman Group.

But how is business value delivery through IT measured? How can assurance be provided that the IT organisation is not investing in bad projects and that there are adequate control mechanisms in place?

Effective IT governance can bring clarity around the responsibility, authority, communication and reporting flows which enhance decision making. It is a key strategic enabler for growth and prosperity and helps to achieve the fusion of IT and the business.

Designing an effective IT governance structure is therefore a significant challenge. This is the reason why Birchman has designed a solution which is approached in stages through a supporting governance framework which takes account of all the key considerations.

IT Governance Framework

The IT Governance Framework, when implemented, will include supporting structure, processes and mechanisms. The processes include strategic decision making and monitoring through methods such as the balanced scorecard. This can be an effective strategic planning and management tool for aligning activities to the vision and strategy of the organisation, improving both the internal and external communications and monitoring organisation performance against strategic goals. Ideally, it should be a pragmatic tool for easily identifying how well the IT governance process is going and how it can be improved.

The scorecard balances financial and non-financial measures together with performance drivers (lead) with outcome measures (lag) and also short and long term objectives/measures.

It tracks performance and progress against four strategic goals: Customer (as perceived by him/her) Financial (fiscal health related to performance) Internal Business Processes (particularly efficiency and effectiveness) Innovation, growth and learning (development and retention of staff).

Each of these perspectives contains objectives - the means through which to achieve strategic goals, company vision and mission statements.

A living method

The scorecard is a living method which can be continuously monitored based on identified priorities. It focuses on User Orientation: How users view the IT function Operational Excellence Measures the effectiveness and efficiency of the IT function Business Contribution - reflecting management's view of the IT function Future Orientation/Innovation: Measures how well IT is positioned to meet future needs.

Its effectiveness depends on Alignment with the corporate strategy Clear integration with the business scorecard (based on common values) - goals and strategy cascading down through the business and its functions and Group involvement (across functions).

In order to track effective progress, a Strategy Articulation Map (SAM) introduces the concept of Strategic Themes around the key strategic objectives. This incorporates the scorecard's Cause and Effect (SC&E) Diagram. The SC&E illustrates the linkages between the Strategic Objectives within the Scorecard. A Strategic Objective may be linked to one or more Strategic Objectives.

The Birchman balanced scorecard approach is an effective mechanism for measuring governance effectiveness. Ultimately, it will help to bring IT governance to light and act as an IT strategy enabler.

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