An entertainment company executive invested millions of dollars in a “data warehouse platform” sold to him by his neighbor. The neighbor represented a transaction security software company. No requirements, no evaluation, no benchmarking, no pre-purchase IT involvement. Once in house, the only contribution the solution made to sharing data was aggregating customer addresses to be used by a marketing application that generates mailing labels. Our friends in the company call it the “non-data warehouse.”

Then there’s the catalog retailer whose marketing analysts asked for a tool that would help them segment customers based on past purchases. The CIO, with best intentions, purchased the most sophisticated and expensive data mining solution on the market – a solution the marketing analysts couldn’t use because they didn’t have the skills or business need for complex mining and models. The intimidating tool is gathering dust while the marketing analysts use Excel to sort mailing lists from data extracts.

Both stories are typical situations Baseline encounters in the field. Resources are squandered and expectations unfulfilled because the business and IT fail to work together effectively.

The Problem

Academics have touted the need to align technology with business since the 1960s. The issue has made the top ten concerns of management since the 1980s.¹ Despite band-aid after band-aid, alignment issues perpetuate, perhaps because the band-aids don’t deal with root causes. Before considering what to do, it’s helpful to understand what hasn’t worked and why.

Attempts to Align
By and large, efforts to align business and IT fall into two categories: funding and leadership.

Funding. Funding efforts center on documenting business intent and estimated value as part of budgeting. Because the finance department typically “owns” budgeting, business justifications are usually structured by finance from a financial perspective. Collaboration with IT is seldom required or even encouraged, although IT might have to plug in costs for anticipated hardware and software needs.

Few organizations take a holistic look across business cases to identify overlapping and conflicting requests, or opportunities to consolidate. In the worst of cases, justification is a bureaucratic rather than intellectual exercise – the search for sound bites and spin known to be effective at securing funding rather than a rigorous analysis.

Decisions tend to be made based on financials alone, making strategic positioning and infrastructure investments difficult to secure because ROI and payback are difficult to forecast when it’s impossible to anticipate every potential use.

Leadership. Leadership efforts tend to focus on reporting relationships. Most recently, the leadership fad was to have the CIO report to the CFO, under the assumption that finance knows how to tie capital investments and expenses to profit and loss. True, but the value of IT is not limited to financials.² Besides begging the measurement question for valuing return on technology³, alignment with finance alone is functionally biased.

Why Funding and Leadership Fail. One-dimensional approaches like funding and leadership tend to fail because they target symptoms. Both business and IT are dynamic and affected by a complex network of internal and external forces. Treating them as static and independent encourages unproductive and conflicting use of resources that results in chaos at worst and diluted return at best.

 
Figure 1: Lack of Alignment Across Functions Dilutes Enterprise Effectiveness⁴

The Root Problem

What’s missing? What’s derailing enterprise perspective and effective assignment of accountability despite solid advice from academicians and best practices from the field? It’s none other than the bogeyman called culture.

Command and Control. The pervasive organizational design in U.S. companies was modeled on the military and codified for business by Alfred P. Sloan. Decision making is highly centralized but operations are decentralized. A rigid and hierarchical “chain of command” links the two. Commonly referred to as “command and control,” orders come down from the omniscient top, and the rank and file execute as directed, no questions asked.

In practice, some organizations are less rigid about hierarchical control than others, but the idea of self-contained units taking direction from someone “above” is so ubiquitous that we tend to confuse autocratic behavior with leadership.

Figure 2: Sample “Command and Control” Organizational Structure⁵

Participative Management. In the mid 1980s, the concept of “participative management” caused a buzz among students in MBA and executive development programs, and led to experimentation with matrix reporting and cross-functional teaming. Both create opportunities to overcome the isolating and organizationally divisive effects of “command and control.”⁶

Figure 3: Sample of a Matrixed Organizational Structure⁷

Generally, matrixed roles have been used to enable business-IT alignment. Most commonly, an IT expert with good interpersonal skills is positioned by IT management to insinuate IT into the business function. It’s much rarer to see an expert in the business function put into a matrixed role by a functional manager in order to insinuate the business into IT. Unfortunately, alignment requires outreach, education and decision rights from both sides in equal measure.

The only thing worse than having IT or the business function dominate a matrixed position is having the matrixed role performed and controlled by a third workgroup – a project management office, for example. The worst situation removes both business and IT expertise from the equation. In the second part of this article, we’ll look at ways in which IT can fix the problem.

References:

1. Consulting firms like Accenture and McKinsey, technology companies like Novell and IBM, special-interest periodicals like CIO and CFO magazines, as well as academicians have conducted surveys for decades that report business alignment consistently among the top ten issues that executives say they need to improve.
2. Strassman, Paul. The Squandered Computer. New Caanan, Connecticut: The Information Economics Press. 1997. Page 39.
3. Strassman, Paul. The Business Value of Computers. New Caanan, Connecticut: The Information Economics Press. 1990. 530 pages.
4. Based on an illustration on page 104 from The Art of Strategic Planning for Information Technology by Bernard Boar, 1993.
5. http://www.hrexpertonline.com/archive/Volume_02_(2004)/Issue_09_(November)/V2I9A1.cfm?session
6. The growing numbers of college-educated management talent created a tipping point of sorts for a new model of leadership. The old model depended almost exclusively on promotion through the ranks; each executive had mastered the knowledge and skill of multiple operations roles before taking the reins. Now that management roles are so frequently filled by “new blood,” leaders tend to have vague and impersonal understanding of operations activities and challenges.
7. Op. cit.
   

Recent articles by Linda McHugh

• The Road to Business-IT Alignment, Part 3
• The Road to Business-IT Alignment, Part 2