Beyond Alignment: Organizing and Governing for PerformanceBy Faisal Hoque | Posted 04-07-2009
Beyond Alignment: Organizing and Governing for Performance
It's extremely rare--unimaginable, even--for a business not viewed as a high-tech enterprise to invest more than $1 billion in technology. But that's exactly what hotel, restaurant, travel and marketing giant Carlson Companies did.
"When I became CEO, I realized that we were in the technology business as much as we were in the service business," says Marilyn Carlson Nelson, who spearheaded the growth strategy as CEO and now serves as chairman.
It wasn't the technology investment itself that drove the results, though. Instead, the way Carlson organizes and governs the company--particularly in viewing technology as a strategic business enabler--made all the difference.
Having started in 1938 as the Gold Bond Stamp Company, Carlson today employs nearly 200,000 people in 150 countries. It owns and manages more than 1,000 hotel properties and more than 1,000 T.G.I. Friday's and Pick Up Stix restaurants; and it owns the $25-billion Carlson Wagonlit Travel, one of the world's largest corporate travel management services, and Carlson Marketing Worldwide, a global marketing, events and marketing analytics company. This is an impressive history of performance, and it was built on a framework of expertly managed technology.
In an interview with the BTM Institute, Carlson explained a key component of that technology management philosophy:
"We put together an enterprise-wide Information Technology Council. Each one of our operating groups, such as restaurants, travel, hotels and marketing, had someone who sat on the council. Our objective focused on the bottom of our technology infrastructure. We also created an architecture group, a subgroup of the council, to leverage the infrastructure based on a common technology platform. The Council set some common standards, which we lacked. We negotiated with each other about procurement so that we could do volume buying and licensing across our various industries or our various brands. We decided to do customer-facing software development in the individual groups."
Elements of Business Technology Management
At Carlson, the structure they call the Information Technology Council brought together all parts of the business. It focused on the immediate benefits of collaboration: a common platform, standards and joint procurement. It balanced enterprisewide concerns with those of individual groups, where meeting the unique needs of customers was paramount. These are all elements of business-technology management and convergence--as is a persistent focus on the customer.
More from Carlson:
"For our travel business, we created a client-reporting portal that automated reports to the clients. For the hotel business, we migrated our peer reservation system to a multi-million-dollar global reservation system. We also created some of the first Web-based hotel-booking sites. This investment helped us to create a highly leveraged, competitive advantage with our hotels. We created something called look to bookÂ®, an exclusive way to award points to travel agents for booking and remaining loyal to Carlson hotels.
"To push us forward, we also replaced many legacy applications with common applications."
As the sophistication of Carlson's technology matured, so did its sophistication in managing it, she says:
"We've refined the governance process for making capital investments over the years. The individual operating group has to justify its innovations based on either a defensive or an offensive position. Specifically, an investment has to either add customer value or make us more efficient. Whatever product or standard we decide to invest in has to go to the Information Technology Council for review and approval. For example, the CIO brings architecture and infrastructure investments before the Council to be negotiated and decided upon. Council members look at what groups the investment will benefit, what type of benefit the company can realize, when the investment needs to happen, what tradeoffs, if any, might need to be made if the investment happens, and where this investment ranks in the overall priorities for a given time period.
"Once the council approves the investment, it goes before the corporate-wide investment committee. This committee consists of the executive team, primarily the CEO, the CFO, the CIO, the chief legal officer, and the HR director. The technology executive for each of the businesses, along with the CEO of that business or the president of that business, presents before the capital investment committee, which asks due-diligence questions about the proposed investment. Investments less than a certain amount go before this committee. Investments over that amount go before the board of directors."
Moving towards BTM maturity
How does an enterprise become more sophisticated in its use of governance and organizational design, as Carlson has?
First, it breaks this broad goal down into the four management capabilities grouped together under Governance & Organization as defined in the Business Technology Management (BTM) Framework. These are:
- Strategic & Tactical Governance
- Organization Design & Change Management
- Communication Strategy & Management
- Compliance & Risk Management
These capabilities focus on enterprise CIOs and business executives concerned with enterprise-wide governance of business technology. They work to structure and manage the business technology organization, allocate investments, manage enterprise risk, and ensure that business objectives are both enabled and shaped by business technology.
Practical steps to maturity
The practical "how to" steps of addressing this area are to:
- Put into place a decision making body (a Business Technology Council) which brings together business and technology professionals to review, approve, and prioritize technology requests; and then put into place an upper management body (a Business Technology Investment Board) which sets policy and serves as an escalation point to settle disputes. Involve business management actively both as sponsor and partner with technology.
- Put into place a Program Management Office that will have authority over the process of bringing investment proposals forward.
- Tie the decision to approve or deny directly to items of strategic importance to the enterprise's business - measure proposals on the basis of business drivers.
- Remember the importance of architecture! An Architecture Review Board needs to review the architectural compliance of proposals, and to advise the BTC on their fit. An Office of Architecture and Standards needs to establish standards, to draft architectural roadmaps, and to ensure that the gulf between architecture and business is closed.
- Realize that an enterprise that uses technology to meet its business goals will need professionals who understand both business and technology. Designing such an organization, finding these people, and letting them prosper requires an active partnership with human capital professionals.
- Communicate frequently, openly, and in business terms - technology that works as an enabler must be on the radar, not "under" it.
- Focus on compliance, and manage risk. These areas should be understood and managed for the enterprise's benefit by a formal compliance and risk management function - these professionals need to participate in governance bodies and advise decision-makers with consistency.
Pitfalls and challenges of Organization Performance
None of these things will happen overnight - there are pitfalls and challenges attached to all of them.
- There will be scope expectations, and more than one critic will say, "Why are we doing all this? Where's the return?"
- Realize that some budget owners are going to resist increased scrutiny over investment proposals: "It's my budget, and I am going to spend it as I see fit!"
- There is a very real possibility that the first communications will be greeted with "who cares?"
- For many, the inclusion of compliance and risk issues into their world is going to be a complicating matter, and they simply are not going to want to go beyond a certain point.
- And, particularly in times of economic stress, making decisions on the future design of the organization will cause a chill among employees - while seeming to resist the call for deep cuts in headcount. These decisions must be handled deftly. The important thing to remember is that there will be a future - and that effective planning will make it just that much more profitable.
A way of life
An enterprise setting out to improve the way it manages business technology must realize that changing its governance and the organization will require time and attention. Changes here are immediately visible, and the results can be quickly realized.
Perhaps more than any other area it will require business and technology to work together, and it will require true business sponsorship and partnership with technology, because it provides the forum for business and technology leadership to make decisions together that drive the enterprise's direction.
What is required is what Carlson did - set goals and work with determination toward reaching them; anticipate and address potential pitfalls in each activity; establish a plan to increase maturity and work according to this guidebook for improvement; and, put into place durable operating models, policies, processes and procedures that will ensure that the changes made in the enterprise during its process of maturation become a way of life.
**The above article is adopted from the BTM forthcoming research series, "Management Maturity for Convergence" and was written in collaboration with Joseph Mimms and Terry Kirkpatrick.
Faisal Hoque is an internationally known entrepreneur and author, and the founder and CEO of BTM Corporation (www.btmcorporation.com). His previous books include "Sustained Innovation" and "Winning The 3-Legged Race". BTM innovates business models and enhances financial performance by converging business and technology with its products and intellectual property. Â© 2009 Faisal Hoque | firstname.lastname@example.org