Only 16 percent of board directors have any IT experience, according to the National Association of Corporate Directors in the US. This is where the CIO must step in to help.
Gartner and Forbes surveyed 175 board members around the world in 2012 regarding the business issues facing their organisations and their attitudes toward IT. The good news is that 86 percent of respondents said they believe that IT’s strategic contribution to the business will increase by 2014. Half of the directors surveyed indicated they saw IT as the key to changing the rules of competition in an industry.
The top five priorities of the board members surveyed were:
• Attracting new customers
• Retaining and enhancing existing customers
• Focusing on core competencies
• Maintaining competitive advantage
• Fostering innovation.
You can see from this list that the priorities of board directors were directly focused on customers: proactive efforts to acquire, retain or develop customers and markets.
Do these board priorities align with the priorities of the CIO? We generally find this is not the case.
Whatever the top priorities of your board are, it is important that the investments being made in IT reinforce them. Although this seems obvious, in practice, it is challenging to drive consensus on what that exactly means.
CIOs need to review strategy and programs with the CEO and key board sponsors, so they can understand clearly how IT supports their priorities.
We advise CIO clients that when interacting with the board, remember to use BOARD communication guidelines:
Brief: Most board interactions last no more than 15 minutes. Know your time schedule and be attentive to time cues from the chair and the rest of the directors.
Open: Transparency is a key objective for most boards. Focus on sharing good and bad news openly and appropriately.
Accurate: When you don’t know something, say so and then go find out. Always check your data before using any with a director.
Relevant: Keep in mind what directors want and need to know rather than what you feel they should know or become educated about.
Diplomatic: Board interactions are not about being right or owning the floor. Your success hinges on being tactful and sensitive to what is happening around you and skilfully responding to it.
As the economy has slowed in many parts of the world in the past 24 months, boards have become reluctant to approve investments which deliver ROI in greater than 12 months.
They have also become reluctant to approve initiatives which require multiple years to complete.
In addition to their priorities, CIOs must sense and understand the investment mood of the board at each moment, and time initiatives appropriately. There is no such thing as a good surprise when it comes to the implementation of major initiatives. Timing is everything.
CIOs should continue to examine how to liberate budget allocations through improved efficiencies, so that the innovation and core competency investments prioritised by the board of directors are maintained.
Ten questions directors should ask their CIO (and the CIO should be prepared to answer)
• Are IT-related investments in alignment with the short and long term business strategy?
• Is the IT portfolio consistent with the risk tolerance of the enterprise?
• Is IT leadership rewarded in line with the enterprise risk approach?
• Is the level of IT investment appropriate to ensure data protection and regulatory compliance?
• Where are the current vulnerabilities to enterprise information and processes and how can they be mitigated?
• Is IT taking appropriate calculated risk to support our enterprise competitive advantage and innovation approach?
• To what extent does the IT portfolio support operational improvements, top line growth and risk mitigation? How much is invested in each category and is this the appropriate mix at this time?
• Is the level of IT investment in key business processes and capabilities appropriate? What has the pattern of investment been in each process over time?
• How does total IT spend compare to revenues over time, and what is relationship between the two?
• Do we have the information we need to analyse and improve the performance of the business? What information, if we had it might change the way we run the business?
Linda Price is group vice-president, executive programmes, Gartner. Email comments to Linda.price@gartner.com
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