17th

Corporate boards are more concerned than ever about technology and its effects on the company.

They hear the horror stories of millions of dollars sunk into technology projects that fail to meet their goals.  They see how one dissatisfied customer can use technology-enabled social media to ignite public outrage against a company. boardroom

They read about website failures during critical times and understand the potential for both short-term and long-term consequences.  They may have even themselves endured fallout from a computer virus.  They see the adverse effect a cyber-attack can have on a company in terms of bad press, lost revenue, legal woes, and erosion of customer trust.  They hear of companies failing because of inadequate preparation for continuation when a disaster occurred.

They fear rival companies gaining a competitive advantage through some technological investment.  They see whole industries disrupted as a result of new technologies.  They know of companies no longer in existence because they failed to react to technological changes.

And they see – and feel – that the pace of technological change and its effect on business is rapidly increasing.

Boards are acting on these concerns.  According to a PwC report, 48% of the directors of large companies spent more than 10% of their total annual board hours discussing IT risks and opportunities, and more than half say that their attention to technology should increase.  The study also found that nearly a third of corporate directors say they lack sufficient understanding of IT to support the company’s strategy and technology risk mitigation.  Even more concerning is that only about 25% of directors “very much” agree that the company provides them sufficient information for effective oversight.  To address the knowledge shortfall, some boards see benefit in adding a CIO member (The Case for CIOs on Corporate Boards) while others are compensating by use of consultant help.

Here are a few practical suggestions for the CIO to improve his relationship with his company’s board of directors:

  • Ask the CEO and CFO for help.  Remember that the CEO serves at the pleasure of the board.  Obviously he needs to be aware of any of your communication with directors outside board meetings.  If you haven’t engaged with board members before, the CEO can give you help getting started and can mentor you along the way.  The CFO can normally provide assistance in this regard as well.
  • Engage regularly.  Meet one-on-one with each individual director on a periodic basis.  This provides them an opportunity to ask questions outside the board meeting.  It should also help to enhance their confidence in the direction of your company.  Gain an understanding of their hot buttons and concerns.  Use this information to keep them up-to-date of things happening inside and outside your company with regard to their specific areas of interest.  Learn what additional information you might provide to help in their oversight duties.  As suggested by McKinsey, propose an annual “state of the union” board report on how the company’s technology capabilities are supporting current corporate operations and the strategic plan.
  • Educate.  While a number of board members may feel they lack a sufficient understanding of IT, that obviously isn’t an invitation to start speaking in 1’s and 0’s, in hexadecimal or even in common IT acronyms.  This is your opportunity to talk in business terms about the benefits technology is bringing and can bring your company.  Be sure to explore beyond cost reduction and efficiency into areas of revenue generation and competitive advantage.  Emphasize how technology is increasing customer expectations.  Talk about how it can help your company better understand and relate to your customers.  You might provide additional assistance to the director by talking about the use of technology at his company.  Who knows?  Perhaps he would see a value in inviting you to sit down with his company’s CIO for a discussion.    There can also be advantages to proposing that an outside expert be brought in to assist with the board technology education process.
  • What’s the risk?  Risk oversight is a key responsibility of the board.  Talk about what you are doing to identify and mitigate various risks.  Ensure you understand the board’s position on the company’s risk appetite and tolerance.  Discuss various aspects of risk including compliance, security, data leakage, business continuity, and reputation.  Be sure to address applicable risks associated with third parties such as your outsourcers or vendors.
  • What’s ahead?  Present your vision of the future effects of technology on your company and industry.  Address potential technological disruption.  Lay out at a high level how the technology roadmap is tightly integrated with the corporate strategy.  Speak of what you are doing to increase the agility and velocity of IT and your business.
  • Show me the money.  Talk about the amount of money being spent on technology within your company.  Show them a breakout of how much is being spent on keeping the lights on vs. growing the business vs. transforming the business.  Emphasize your efforts to minimize the everyday costs of running the business to funnel more dollars into moving forward.  Be sure to include the dollars not under direct control of IT.  Provide a comparison against the technology expenditures of your direct competitors as well as against an industry benchmark.  Mention the governance processes in place to ensure that technology dollars are being spent where they can best benefit the company.  Highlight some of the business benefits gained from recent major projects (and do not forget to give credit to your fellow business executives).

A company can benefit greatly from a close relationship between the CIO and the board of directors.  What other suggestions do you have to advance this relationship?

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