CIOs on the board? It’s complicated

Do boards need more senior technology expertise? The answer’s a slam-dunk yes. Increasingly, that means adding a sitting CIO as a director. But getting the right fit isn’t easy. Nor is it the only way to go
By Diane Peters

Up to speed: From cars to consumables, the greater technology’s influence on strategy and risk, the greater the onus on boards to increase their digital IQ

In case you haven’t heard or read for the 10th time today, we’re in the age of digital disruption: AI, Internet of Things, Bitcoin, the cloud, cyberhacks. Along with that, come reports that chart a rising trend in companies recruiting chief information officers (CIOs) to serve on corporate boards.

According to an article in the Harvard Business Review last March, unpublished data from HR firm Korn Ferry found that 31% of Fortune 500 companies have a CIO on their boards, up 74% over the past two years. Recent stateside examples include Jim Scholefield, global CIO and vice-president of Nike Inc, joining the board of Stanley Black & Decker Inc., and Michelle McKenna-Doyle, CIO and senior vice-president of the National Football League, taking a seat on the board of ComScore Inc.

Seventy-four percent in two years is one dramatic leap. While there are no comparable stats for Canada, experts familiar with Canadian board governance say they’re seeing a gradual uptick in top tech executives landing board seats. “It’s happening here, slowly,” says James McKeen, emeritus professor at the Smith School of Business at Queen’s University. He thinks public companies should be seeking tech veterans to inform strategy. “IT is enabling everything new and exciting in business today,” he says.

There’s zero doubt that tech is huge across multiple sectors—every company is a tech company, another nugget you’ve surely heard before—and that directors with comprehensive tech expertise could benefit most boards. However, this is no mature relationship. CIOs may lack the right skill set, while lingering biases about tech executives might further taint their effectiveness and how much they contribute, even when they score a seat.

That reality, and a close read of the data, have some questioning whether the trend is moving as quickly as the numbers above suggest. “I’ve been seeing some pretty big numbers and I’m a little skeptical,” says Catherine Bromilow, partner with PwC’s Governance Insights Center in Florham Park, New Jersey. She notes that her organization found less than 1% of directors with Fortune 500 companies had a tech background back in 2009—that’s a long time ago, but a rise to 31% when boards turnover so little seems a stretch to her.

She favours the numbers published by Spencer Stuart. It found of the 36 new directors added by S&P 500 companies in 2016 that are classified as line and functional leaders, just 16% were tech executives—that tallies to around six in total. The same index in 2015 counted six CIOs and four others with a tech background, for a total of 10 of new board arrivals.

So we surely have a trend here—perhaps not a staggering one, yet instructive for boards nonetheless. Some growth makes sense: in the digital economy, IT pros should play an increasingly high-profile role. Most board leaders understand finance, risk, marketing and even a little HR, but tech remains a knowledge gap for many.

That puts boards at risk for not asking the right questions. With technology, knowing the nuances of execution matters. McKeen points to the announcement by Tesla last fall that its Model 3’s delivery would be delayed. “If you’re not tech savvy, would you really be able to challenge that decision in meaningful ways?” asks McKeen.

“You really need some depth and some breadth as well when you deal with things like enterprise-wide software systems,” adds Roger Mahabir, chairman and CEO of Tracker Networks Inc. and a tech executive who’s served on dozens of boards. “These systems can make you a ton of money, or they can cripple your business.”

Meanwhile, the sheer velocity of change makes tech an ever-moving target not everyone is equipped to follow. “Tech changes much faster than any other operational function,” says Catherine Aczel Boivie, managing director of Vancouver consulting firm Strategic Technology Leadership Corp. and a senior tech leader who serves on numerous boards. “One of the benefits of having tech expertise on the board is he or she can keep up with these changes and advise the board.”

But are there other ways boards can better wrap their heads around digital issues? “The only answer isn’t just put a CIO on your board to address the skills gap. Directors generally should up their digital IQ,” says Bromilow. To that end, PwC (like many consulting firms and associations) has developed a range of tech-related materials, available on its web- site, for directors to access as professional development. Coupled with that, she says a company with a skilled CIO who can present effectively to the board should be enough to keep an organization current.

Another factor working against the trend might be tech execs themselves. “You have to be able to talk business,” says Boivie. She sees skills gaps in the professionals she meets: they don’t know big-picture business, use too much lingo and focus more on the wow factor of a new technology, and not the bottom line. Bromilow recently heard from a col- league who heads up the governance committee for a large public company’s board and who was interviewing tech executives. “Every one of them that she spoke to, whether a CIO or a CTO, came in and said, ‘If I was on your board, I’d tell your management team to do this,’” she reports. “That’s not the role of the director.” Some of this can be traced back to how CIOs work day-to-day: many report through the CFO and don’t frequently deal with the CEO or get to address the board on big-picture issues.

Organizations like the CIO Association of Canada offer professional development opportunities to get these executives up to speed, but McKeen thinks such efforts can only go so far. He has studied perceptions of the CIO role among students and executives and found, consistently, that the role has been stereotyped. “CIOs are perceived as having adequate social leadership skills, but lacking leader-dominance skills such as taking initiative and being assertive. Our results suggest that business students enter their professional careers with well-defined stereotypes that can potentially influence the role of the CIO,” wrote McKeen and Paola Gonzalez in a 2013 study published on the subject.

McKeen thinks such biases linger and combine with the longtime assumption that tech is a cost and a risk, nothing more. “Most boards view tech as a risk-management issue rather than a business differentiator,” confirms Boivie. Seasoned leaders may be able to push through old views and get involved in strategy sessions, but many tech executives will stay pigeonholed—and busy—with cybersecurity and tech costs.

This may well shift as the role of the CIO inside the company matures and tech executives build more business and strategy smarts. But since tech is moving fast and this trend appears to be inching along, companies risk falling into the gap if they’re not putting digital on their big-picture radar in other ways. “Tech is the heartbeat of most businesses today and will be even more so in the future,” says Mahabir. “You’d be crazy not to have that kind of skill around the boardroom table.”

Photography by Reuters.

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