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Governance: Deciding Factors

By Alice Dragoon

August 15, 2003 — CIO — Stuart Scott may be the vice president and CIO of GE Industrial Systems, but he sees himself as a venture capitalist. He and his colleagues on the investment council, which includes the CFO and the heads of manufacturing and engineering, sort through a tantalizing array of business and IT projects every couple of weeks during budget season to determine how best to invest the company’s money. "The way I view my job, I’m a VC. I’ve got things I’m trying to achieve for the business and for GE shareholders," he says.

Like any VC who wants to stay in business, Scott constantly looks for the highest possible return, subjecting potential investments to a level of scrutiny that can only be described in polite company as rigorous. While Scott’s governance practices aren’t for the faint of heart, they consistently generate good results. This rigorous governance is one of the best ways to foster resourcefulness. "People think of governance as something very constraining and resourcefulness as something innovative, but in fact, governance is a core component of resourcefulness," says Howard Rubin, executive vice president at Meta Group. "It’s hard to foster resourcefulness without governance." In other words, a solid governance structure promotes resourceful thinking within an organization. Here’s a look at the top governance practices of some of the CIO 100 honorees and how they’re putting them to work to encourage resourcefulness and create value.

1 Scrutinize For Value

Treat each IT project as an investment, and recognize when it’s time to cut loose projects that aren’t delivering sufficient value. After a technology buying binge in the late 1990s, Yellow Technologies (the IT services company that serves Yellow Transportation) set up its own version of The People’s Court to review whether usage levels justify renewing software licenses and maintenance agreements. Once a month, four IT "judges" hear department managers defend the value of software that’s up for renewal. By not renewing software that’s underused or overlapping, Yellow (which acquired fellow CIO 100 honoree Roadway in July for $966 million, after the CIO 100 honorees were selected) has eliminated 2 percent to 3 percent of its annual software licensing costs and targeted another 6 percent for potential elimination.

Treating IT projects as investments requires going beyond tracking whether projects are on time and on budget, says Meta Group’s Rubin. If the market changes, a project may not produce the desired outcome, even if it’s early and under budget. Rubin advises tracking whether projects are on time, on budget, and on scope and on value.

 

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