As CIOs increase their interactions with the board of directors, it is vital that they improve their knowledge of this unique and independent audience, according to Gartner. The analyst firm says only 16 percent of board directors have any IT background or experience, so CIOs need to treat the board as one of their most valued customers if they are to improve their overall ability to work with the board of directors.
"The board of directors is an entity that has little IT experience or time to dedicate to the business of the corporation, and whose attentions can be divided among other companies. Nevertheless, it is the highest authority in the management of the organisation," says Gartner analyst Jorge Lopez. "To better prepare CIOs for the time when they will have to present to the board of directors, or to improve what they are doing with the board now, they'll need to know some vital information about the board of directors in order to build an effective bridge to it."
Gartner says these are the seven areas CIOs must understand and act upon in order to effectively work with the board:
The board has little IT experience: The reality is that board members are brought in for their expertise and experience in business or their control of a major portion of total stock equity, not for IT knowledge.
CIO action: Get to know the backgrounds of the board members, as well as the priorities of the entire board, so that in your communications, you can better connect your planned IT initiatives with the priorities of the board.
The board meets a few times a year: The board meets once a quarter and perhaps holds a committee meeting once a quarter as well. Some boards may meet more frequently.
CIO action: Focus on preparation during the time between board meetings. Assume you have little time to make your points if you have to review your progress on a board-supervised project. Concentrate on the point that the board directors need to know and provide reference materials. Make sure it is all in a business-and board-oriented context.
The board's business is focused on a few priorities: More than 90 percent of the board's time is consumed by the areas of risk, strategy, audit, finance, investment, social issues and compensation. Even when your initiative carries a high priority, other issues can arise.
CIO action: Do not expect too much time or attention to be paid to an initiative unless it is highly strategic or catastrophic. Prepare to be flexible in the time you are allotted, even preparing a two-minute summary of the situation that states the purpose, conclusion and actions you want the board to undertake.
Board director activism has grown after corporate scandals: Triggered in 2001 by the accounting scandal of Enron and reinforced since then by law, corporate governance codes such as Sarbanes-Oxley have been enacted worldwide. This has led to the rise in impact of the outside director, an independent person to review the management of the company. It has also raised the visibility of corporate risk to a degree not possible before 2001.
CIO action: Be prepared with business case justifications for a proactive interest from the board in the details of IT projects that are either large fractions of the total budget or strategically important to company growth or survival.
The CEO serves at the pleasure of the board of directors: For stock companies, the board of directors is the highest authority in the management of the corporation. In some corporations, the CEO holds the titles of CEO and chairman, although this is declining as corporate governance seeks greater accountability and risk management by separating the roles.
CIO action: Of course, although the board is higher than the CEO in authority, for the CIO, the CEO is still the boss. Make sure you work with the CEO on any initiatives with the board, and do not surprise your CEO in front of the board.
There may be many boards in the same company: Some organisations have an executive board and a nonexecutive board. In addition, some companies have multiple boards of directors for subsidiaries, joint ventures and not-for-profit organisations.
CIO action: If you are involved in matters that require the approval of a full board of directors at a corporate level, and you have a board for your specific unit, be prepared to secure approval of any initiative through both bodies. The CEO will usually navigate the path to approvals, but know the landscape as well as you can through your own study.
Like all human organisations, boards have their share of politics: As companies continue to navigate through uncertain economic times, the internal politics of the board surface as alliances form and shift. It is important to know who holds the power on the board. Is it concentrated in one shareholder? Is it shared among a group that votes as a coalition? Does the CEO hold more power than the board?
CIO action: For CIOs who aspire to sit on a board of directors or to lead an executive team, knowing the power centres and how to influence them is a key skill. Those who are less ambitious may find it convenient to outsource all issues regarding politics to their CEO.
The bottom line? “CIOs must learn to treat their board of directors as they would treat their customers," says Lopez. This means knowing the members and their priorities and ensure they have plans in place to meet board-level expectations.
To comment on this article, please email the editor.
Sign up to receive CIO newsletters.
Follow CIO on
Click here to subscribe to CIO.
Send news tips and comments to firstname.lastname@example.org
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.