Blog : BOARD TALK
|Posted on June 28, 2013 at 9:55 AM|
I have previously expressed concerns here about what appears to be a worrying lack of technology knowledge in many UK plc boardrooms.
I am delighted to introduce someone who is doing some exciting research on technology and boardrooms and is based in Australia, from where we get some excellent ideas on governance. So here's some food for thought for the weekend.
Elizabeth Valentine is a doctoral candidate at Queensland University of Technology. Her research and thesis focuses on, ‘Board competencies for effective enterprise business technology governance’.
"It’s hardly surprising that the call for technology-savvy directors is growing louder.
There can be serious consequences if boards ignore or delegate enterprise-level technology governance. This is because boards are operating against a technology-saturated backdrop characterised by speed, complexity and ever-changing risk.
They are expected to govern in an environment where the cloud, big data, mobile and social media are changing the way businesses operate and how modern societies work. Should Technology be part of board oversight? The role of the board in governing IT may be relatively new, but it looks as though it’s here to stay.
And there are problems. More than 90% of boards identify technology as mission critical and the skill most likely to be under-represented or missing from boards. But when less than 20% have the governance mechanisms and measures in place to know whether they are at risk, clearly there is a gap between awareness and action.
Evidence that something’s awry can be found among high profile, expensive IT failures. If you read available inquiry reports about these cases, enterprise technology governance (ETG) is missing, the linkage between management and board oversight either non-existent or broken. Increased regulation and the introduction of voluntary standards over a 10+ year period are further indicators that all is not well in the boardroom when it comes to technology governance.
However, with increased compliance and closer scrutiny, the necessity to govern technology investment and risk at the enterprise level has become a part of the board’s fiduciary duty of care, whether they realize it or not. What is enterprise technology governance? At the strategic level of the enterprise, ETG differs significantly from operational IT governance in the same way that strategic and operational management differ.
ETG is about the board’s oversight of technology and information as strategic assets. At this level, the board focuses on how to best derive enterprise value and manage risk from the use of data and information via technology enabled systems. They use the strategic oversight of board governance to focus technology investment decisions and priorities, and use governance mechanisms and skilled questioning to hold management accountable.
Emerging recommendations suggest that ETG should be an integral part of overall governance.
Capability and competence within the board is the key. Capability requires both a level of technology maturity and the technology-related competence to analyse what is contained in board papers and proposals, and to question and to challenge appropriately.
The bottom line is that a board’s combined knowledge, skills and experience drives their focus and priorities and underpins decision quality. A board’s capability and competence can have a profound impact on whether the organisation not only has a culture that uses data and information for decision making and competitive advantage. It also underpins whether the organisation realizes the value of technology investments (Marchand & Peppard, 2013).
Without a good percentage of digitally-savvy directors, boards risk ‘flying blind’ (Carter & Lorsch, 2004). Financial, competitive, compliance and reputational risk are all at stake in a hands-off approach to ETG. Conversely with a strategy-matching and balanced set of competencies, boards are better equipped to meet their governance responsibilities (Leblanc & Gillies, 2005).
ETG-focused boards can ask the right questions, challenge responses in relation to the businesses they govern and are much more likely to ensure that the right information makes it onto the board agenda (Andriole, 2009).
In today’s technology saturated competitive environment ETG should be as integral to a board’s strategic orientation and priority skill-set, as finance and legal already are. But there’s a gap between awareness and either developing or recruiting technology savvy directors.
However it might not be as difficult to resolve as it appears. As was recently suggested, ‘To be effective in oversight of an organisation’s use of IT, boards don’t need to understand the detail of technology as much as they need to understand how management should be dealing with technology. Since boards are already well versed in oversight of management in respect of other resources, the learning curve may not as steep as some might imagine’ (Toomey, 2013)."
Further references to the above and information can be obtained from Elizabeth Valentine and you can participate in her research by getting in touch with her here, the site at which this blog post first appeared. All rights are reserved to Elizabeth Valentine 2013.