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Achieving social alignment between business and IT – an empirical evaluation of the efficacy of IT governance mechanisms

  • Research Article
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Journal of Information Technology

Abstract

How can firms improve the degree of social alignment between their business and IT units? Many years of research have shown the importance of business-IT alignment and its various facets, yet research on the efficacy of IT governance mechanisms to improve business-IT alignment is scarce. In this paper, we develop a model of social alignment at the operational level that considers the degree of social capital between an organization’s business and IT units, IT personnel’s business understanding, and a set of formal and informal IT governance mechanisms that drive the creation of social alignment and business value. Using survey data from 132 US banks, we show that social alignment is driven to varying degrees by a broad variety of IT governance mechanisms ranging from top management support and IT representation on the executive board to joint IT planning and IS training, regular meeting cycles, and liaison units. Our research contributes substantially to the practical demand on business-IT alignment research for an effective toolkit of IT governance mechanisms.

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Notes

  1. According to the InformationWeek Analytics Surveys of InformationWeek 500 executives (2002–2010), the financial services industry (including banks) spends, on average, around 7% of annual revenues on IT (www.informationweek.com).

  2. Federal Deposit Insurance Corporation, www.fdic.gov.

  3. For those items that contained only a few missing values (less than 12.5 % of the used data set), we applied the regression algorithm for missing value treatment in SPSS 18.

  4. Since collecting our data, 11 (8.3%) of the participating banks have disappeared from the market, compared with 132 (8.8%) of the largest 1500 banks which have disappeared from the market according to FDIC’s failed bank list (https://www.fdic.gov/bank/individual/failed/banklist.html). Thus, there is no indication of a survivorship bias in our sample.

  5. We conducted Mann-Whitney tests to check for equal distribution of both total assets and return on assets when comparing our sample and the population (total assets: t=0.064, P<0.05; return on assets: t=0.461, P<0.05).

  6. A χ 2 test revealed no significant differences between population and sample in regard to bank types (χ 2=1.448, P=0.836).

  7. We conducted a workshop with banking industry experts from a renowned consultancy firm. Further, we involved two university research groups that specialize in banking research. To validate the assignment of the different governance mechanisms to either the group of formal or informal governance mechanisms (based on Peterson (2003)), we conducted a card sorting with nine IT governance experts who assigned each governance mechanism to one of the groups. Five of the ten governance mechanisms were assigned to the correct category by each respondent; overall, eight mechanisms were assigned to the correct category by more than 75% of the respondents. The two remaining mechanisms (colocation and joint IT planning) were also assigned to the right category by the majority, but the percentage was lower. Therefore, we also tested the PLS model with intentionally incorrectly specified measurement models (each of the mechanisms assigned to the wrong category); this robustness check showed no structurally different results compared to the ones shown in Figure 2. Finally, we did several pre-tests with managers from banks using a think-aloud approach.

  8. Binary item built from the ‘change codes’ in the FDIC list (0 if no absorption, consolidation, or merger related code was included for the past 5 years before data collection; 1 if at least one such code was present).

  9. Single survey item providing three statements of which the one best representing the bank’s strategy type should be marked: first mover (13.6%; ‘We are always the first to introduce new technologies and products.’) vs fast follower (34.1%; ‘We observe the actions of our competitors and follow rapidly.’) vs secure follower (52.3%; ‘We take over new technologies and processes if they have been proved to be successful by others.’).

  10. Single survey item: ‘Our corporate loans business acts in a highly competitive environment.’ (5-point Likert scale ranging from ‘strongly agree’ to ‘strongly disagree’).

  11. The VAFs are calculated by multiplying the path coefficients along the causal chain and dividing the resulting product by the total effect (which is in turn the sum of the products of the coefficients along all causal chains).

  12. Note that the total effect means of the integration mechanisms are significantly different (according to Mann-Whitney) except those among ‘IT on executive board’ and ‘joint IS training’ (t=0.206) as well as between ‘joint development of process documentation’ and ‘joint IT planning’ (t=0.530), ‘joint development of process documentation’ and ‘liaison unit’ (t=0.259), and ‘joint IT planning’ and ‘liaison unit’ (t=0.090).

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Acknowledgements

The empirical data used in this work was collected by the first three authors as part of a research project at the E-Finance Lab, Frankfurt am Main, Germany (www.efinancelab.com). We gratefully acknowledge the financial support of our industry partners.

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Authors and Affiliations

  1. University of Bamberg, Bamberg, Germany

    Frank Schlosser & Tim Weitzel

  2. Frankfurt School of Finance & Management, Frankfurt, Germany

    Daniel Beimborn

  3. German Graduate School of Management & Law, Heilbronn, Germany

    Heinz-Theo Wagner

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  1. Frank Schlosser
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Correspondence to Frank Schlosser.

Appendix

Appendix

Table A1

Table A1 Overview of constructs and items (including descriptive statistics; all items were measured on a 5-point Likert scale): 5 – totally agree; 1 – totally disagree
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Table A2

Table A2 Construct reliability and validity, inter-construct correlations
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Schlosser, F., Beimborn, D., Weitzel, T. et al. Achieving social alignment between business and IT – an empirical evaluation of the efficacy of IT governance mechanisms. J Inf Technol 30, 119–135 (2015). https://doi.org/10.1057/jit.2015.2

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