Strategic Innovation

By Howard Baldwin, CIO Leadership Forum

As IT becomes more important, and Sarbanes-Oxley more imposing, CIOs must learn to develop good relationships with their boards

Just 18 months ago, professors Richard Nolan and Warren McFarlan wrote in the Harvard Business Review: "A lack of board oversight for IT activities is dangerous; it puts the firm at risk in the same way that failing to audit its books would." It was not only the increasing importance of IT that spurred the professors' insistence; it was also the requirements within Sarbanes-Oxley for transparency that require a board's understanding of IT.

The board of directors, after all, bears the responsibility for the financial well-being of a public company; it represents the interests of the stockholders. That's why the HBR article, among other voices, called for companies to create IT governance committees-basically, to provide oversight of IT in the same way that board committees monitor finance and human resources. Nolan and McFarlan insisted, interestingly, that the IT committee should include-aside from independent directors-a member of the audit committee, to keep track of costs.

In light of this, how do you, as a chief information officer (CIO), develop a relationship with the board? If you are not on the board, you've been buffered by whomever you report to-either the chief executive officer (CEO) or the chief financial officer (CFO). Being isolated from the board, however, is not a good way to ensure that your voice is heard. According to experts, there are several excellent ways to improve your relationship with the board. They may take some work behind the scenes, but all will help you to manage expectations, improve your chances of getting projects approved, and avoid being blindsided.

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Take this quick quiz: How much time do you spend managing relationships with your CEO, your chief operating officer (COO), or your board? How much time do you spend managing relationships with your subordinates? And how much time do you spend managing relationships with your peers. Former Bristol Myers Squibb CIO Jack Cooper, who serves on several boards and consults with CIOs on their job performance, says that the answer and the goal usually differ widely. The vast majority of CIOs-90 percent-spend 90 percent of their time managing down, 9 percent managing across, and 1 percent of their time managing up. "That's a good strategy if you want to stay where you are. If you want to have a greater impact, you have to break that model so that it's divided into thirds."

Some experts recommend that before CIOs tackle the board, they sit down with their direct report and establish the metrics that gauge a project's success. It's as simple as "Here's the project, here's how it's linked to our strategy, and here's how we measure its success."

It's important, too, that you and the CEO or CFO agree on how much detail you're going to provide the board. "You can bury people in levels of detail, which is not good," says Craig Lawton, senior partner for the Americas IT Practice at Boston Consulting Group. "But just saying that everything's great isn't good either. Find the happy medium." Sometimes it depends on the status of the project, adds Lawton. You can use a red light/yellow light/green light system for identifying problems; you should provide more details on the projects that are in danger than on ones that are proceeding smoothly.

Communicate Clearly

As Nolan and McFarlan note, the IT expert "must be a skilled communicator who does not hide behind technology jargon or talk down to board members." Robert Haas, a partner in A.T. Kearney's IT strategy practice, puts it more succinctly: If you talk technology to the board, you won't be invited back. "You have to use only the most strategic business terms-return on investment (ROI), customers, innovation, cost reduction, products," Haas says, suggesting that you study other presentations that have been made to the board.

"Most boards have a perspective different from the executives'," says Haas. "They're not going to get excited by the same things you are. They're concerned about risk and ROI, but not necessarily about features and functionality." Equally important: Be brief. Haas has seen people bring 30-page presentations board meetings, only to be asked to boil them down to three pages.

When you do talk to the board about projects, sticking to the ROI and other metrics, Haas recommends doing it in tandem with another executive. "If it's an enterprise resource planning implementation, present it with the COO," he says. "It's a good way of showing that you have an understanding of the business, and that the project is being done for business reasons."

One other suggestion: Show, rather than tell, what you're doing. "Give them a tour," suggests Steve Crosby, managing director of PricewaterhouseCoopers' advisory practice for investment management and securities. "Take them to the network command center, let them visit the data center, take them into the glass house. Explain what the people are doing, how their monitoring helps manage risk, retain clients, and deliver returns to the bottom line. Explain why you have fire suppression technology, and how the back up and recover works in the even of a disaster. Make it real for them." This is especially important, he adds, if you're asking them to fund improvements. "You need to make it more than just a cold business case or an array of expensive blinking lights. Tie it back to the business so they can see how risk gets mitigated, capacity gets expanded, and new markets and clients can be served."

Understand How the Directors Think

There's nothing worse than walking into a board meeting and being blindsided by questions or concerns that you can't answer. How do you prepare? By making sure before any meeting that you understand the concerns of the directors. Cooper recommends profiling each of the board members. If one of the directors is a venture capitalist, understand what he's invested in. Then, if you run into that director at a cocktail party, you have something to discuss, and you know what he's focusing on in terms of technology. "When we were dealing with Y2K, I went to each of the board members and got the name of their CIO," remembers Cooper. "Then I asked each of those CIOs how they were doing. That way, I wasn't blindsided by something the directors brought into a meeting that they'd gotten from their CIO."

"There's no downside to building foundational relationships with board members," says Lawton, noting that you should always keep your superior in the loop-especially if a board member comes to you first. But be careful of that, Cooper warns: "Sometimes board members like to cultivate private sources of information to get in-depth knowledge." Always report what's going on to your superior, suggests Cooper, adding, "Dealing with the board isn't rocket science-it's a hell of a lot more complex."