IT Governance Mechanisms in Public Sector Organisations: An Australian Context

Introduction

During the last decade, information technology (IT) has been playing a more important role for organisations in achieving their goals. Both private and public sector¹ organisations have been experiencing higher expenditure on IT, and consequently, higher benefits are expected by their stakeholders (Ward & Peppard, 2002; Gormolski et al., 2001). Thus, it is crucial for both organisational forms to establish good governance in IT to obtain more effective use of IT.

In Australia, the role of corporate governance mechanisms including IT governance mechanisms has been heightened since the spectacular corporate collapses of HIH Pty Ltd and One.Tel Pty Ltd in 2001. In his report on the HIH collapse in March 2003, Justice Owen provided insight into the peculiar circumstances of the type of governance mechanisms required in Australian corporations. He (2003, p. xiii) stated, “Corporate regulation in Australia in the late 1990s and into the present decade was replete with mechanisms designed to detect danger signs and promote the financial health and longevity of commercial entities…. Despite these mechanisms, the corporate officers, auditors and regulators of HIH failed to see, remedy or report what should have been obvious. And some of those who were in or close to the management of the group ignored or, worse, concealed the true state of the group’s steadily deteriorating financial position….Those responsible for the stewardship of HIH ignored the warning signs at their own, the group’s and the public’s peril. The culture of apparent indifference or deliberate disregard on the part of those responsible for the well-being of the company set in train a series of events that culminated in a calamity of monumental proportions.”These insights emphasized the need for governance mechanisms that focus on stewardship, and promoting and communicating a culture of compliance to the organisation. These insights were reinforced in the “Principles of Good Corporate Governance and Best Practice Recommendations” promulgated by the Australian Stock Exchange (ASX) for publicly listed companies in Australia in March 2003.

To implement IT governance effectively, the principles and lessons of good corporate governance must be reflected in the individual IT governance mechanisms put in place for the organisation. Accordingly, in this work, we investigate a set of IT governance mechanisms (e.g., IT steering committee, IT organisational structure) that encourages behavior congruent with the organisation’s mission, strategy, values, norms, and culture (Vaswani, 2003; Weill, 2004). However, caution should be applied in implementing those mechanisms as the nature of organisations (i.e., private and public sector organisations) has an important role in determining the effectiveness of the mechanisms (Edwards & Clough, 2005).

Several studies have examined the practices of IT governance mechanisms in private sector organisations (Ali & Green, 2005; Vaswani, 2003; Well & Ross, 2004). Public sector organisations have long recognized the importance of effective IT governance to their success (Vinten, 2002). However, little research has been conducted into examining what mechanisms contributed to establish effective IT governance within public sector organisations. Have public sector organizations, particularly, in Australia, learnt from the lessons of the corporate collapses of the early millennium and implemented appropriate individual IT governance mechanisms that would lead to an increased level of overall effective IT governance? Thus, the objective of this study is to identify factors required to establish and implement effective IT governance within Australian public sector organisations.