Governance of the IT Function: Valuing Agility and Quality of Training, Cooperation and Communications

It has long been argued that the organizational structure and reporting relationships of the IT functional area profoundly affects organizational performance. However, since most of the evidence is anecdotal, and even rigorous econometric analysis cannot show causality or substitute for controlled experimentation, normative prescriptions have been impossible to test. Using NK simulation modeling, a tool developed for studying dynamic behavior successfully used in strategy and evolutionary economics research, we are able to conduct controlled parameter-by-parameter experiments of alternative governance structures. Our findings suggest that under most conditions (1) IT does matter to the performance of the firm; (2) the governance of the IT functional area does affect the performance of the firm; and (3) the CIO’s business savvy and ability to communicate with the rest of the senior management team will affect performance, by determining the quality of consensus decisions reached and the speed with which consensus is achieved.