Outdated governance practices and over-reliance on traditional but ineffective capital allocation practices are preventing companies from keeping up with the “new work environment,” according to the results of research by CEB’s Andrew Horne and Brian Foster. Writing on the Harvard Business Review, Horne and Foster label what is being prevented as, broadly, “innovation.”
The new work environment in which this disconnect is occurring is one where knowledge workers are desperate for the tools and freedom to do their best work, but where IT is focused on automation. Productivity goals are not being served in this scenario. In its executive memo on the topic, CEB succinctly described the problem:
“IT relies on business leaders to translate employee demand and treats employees as a single group with stable, long-term needs that can be supported with one enterprise solution. IT assumes employees have the skills to do their jobs and only need help understanding the tools IT provides.”
Talk about a silo. The IT organization could very easily be painted as the root of the problem in this scenario, but if it’s operating within a governance structure that shows, on paper, that it’s meeting its goals, it may be completely blindsided when that occurs. Horne and Foster name three main missteps leading to this ineffectual system. Resources and decision-making are kept tightly within this worldview because:
- Management allocates capital to existing project ideas, though they “might not be that knowledgeable” about how productivity could be improved. Better ideas are not funded if not part of these established projects.
- Management places too much emphasis on ROI-based business cases, and not enough emphasis on projects that are more difficult to simply quantify but could lead to high productivity gains, especially for knowledge workers.
- Politics leads management to spread capital among too many business areas, in the interest of fairness rather than innovation.
Without naming names, Horne and Foster highlight companies that have broken free of these traps, with good results. One large firm, rather than starting with a list of projects, starts with a list of critical capabilities and examines how robust the information that managers in these areas really is. The process “leads them into all sorts of overlooked opportunities,” and aids prioritization for maximum impact.
ROI business cases are virtually untouchable in the age of short-term goal sets, but a large high-tech firm reported to Horne and Foster that it has made the break. Critical capabilities are ranked in importance to realizing goals, and then are assigned investment levels to match. More detail on how the politics of this decision-making process would make a fascinating follow-up post.