News Analysis

Bad governance causes expensive business failures

by Dan Byrne on Oct 4, 2022

Bad governance is at the heart of a severe problem in the Irish business landscape. 

Business projects are failing or being abandoned at staggering rates as firms realise that they simply don’t have the expertise at the leadership level to see them through, suggests a new survey,

As a result, vast amounts of projects stall indefinitely before getting off the ground, and because they go nowhere, they result in six-figure losses on average. 

More than anything, the results indicate a severe lack of governance capacity in one of Europe’s most vibrant economies.

What is going on?

Nearly three fifths (59%) of Irish organisations reported having to abandon a project because it suffered from bad corporate governance, according to a survey conducted by Censuswide for IT solutions firm Auxilion

In over 80% of those cases, respondents said that outsourcing would offer greater chances of success in future. 

In addition, 72% of survey respondents who had seen a digital transformation project fail said poor IT governance was the primary cause. 

Ultimately, these failures have cost firms over €320,000 on average in the last year. 

“Our survey suggests that Irish organisations are struggling to deliver digital transformation programs successfully, and it’s likely costing hundreds of millions of euros across the board,” said Consultancy & Competency Director at Auxilion Eleanor Dempsey. 

“Companies are clearly underestimating the complexities of driving change, automating processes and replacing technology.”

Why is this important?

More than anything else, this news showcases the importance of governance to transformative projects and how much employees will depend on their leaders to guide these projects to success. 

The pandemic has put more pressure on firms to fill leadership positions with IT expertise, but the talent pool in this area is still small. 

The results also show that transformation projects are at particular risk when companies source their leadership internally. 

Four in five respondents having more faith in outsourcing speaks for itself. They are unsure of their firms’ capacity and doubt their ability to provide results. 

What we see in Ireland is what happens when firms aim high and don’t (or can’t) invest in the means to get them there.

But this is just Ireland, right?

Yes, but look at the role Ireland plays. 

It is one of the most dynamic economies in the European Union and the regional HQ for global businesses, both great and small. As a result, failures on this island often reach beyond its shores, with ramifications across the continent and beyond.

Can the problem be solved?

Keep an eye on the talent pool to answer that question. 

“Getting the governance part of the puzzle right is crucial to embracing digital thinking and capitalising on transformation,” says Dempsey.

But she acknowledged that this was easier said than done since the capacity of the industry to provide the proper IT knowledge was limited. 

“It’s worth noting that the skills required to drive digital transformation are scarce and not readily available internally,” she admitted. 

“To transform meaningfully, businesses not only need to deploy new applications and technologies, as well as business behaviours and processes but then embed these changes across the entire team.”

“After all, transformation projects are driven by people – and they must have the right IT governance in place to work in a collaborative and impactful way to both manage and benefit from change.”

Ultimately, much work remains to get the right people in leadership positions, and this process could take several years. 

In the meantime, firms appear to have two choices:

  1. Be more realistic about what projects they can achieve to avoid funnelling money into dead ends. 
  2. Increase efforts to source able IT leaders from available talent pools, outsourcing if necessary.

Diploma in Corporate Governance

Enhance your career as a director. Develop the practical knowledge, insight and global mindset to be a great board director.

Learn more

Diploma in Corporate Governance

Enhance your career as a director. Develop the practical knowledge, insight and global mindset to be a great board director.

Learn more
Corporate Governance
Digital transformation

Related Posts