Noticias en la Red: Corporate Governance. Do You Serve On A Technology-Savvy Board?

Over the years, while I've learned that good boards do many things, from offering ideas to judging performance at critical points, the importance of the original distinction remains. Boards, and their activities, are fundamentally about making sure that the right things are getting done. In the realm of technology, this role is easily overlooked. Many boards are preoccupied with issues of ethics and governance, short-term performance and leadership succession. Under the pressure of these overwhelming here-and-now priorities, it's easy to overlook technology. But technology, of course, represents an important future view that must be seen in boardrooms today. Making sure the right things are being done in technology requires some investment on the part of the board, in the people it invites as members, the way it uses its time together and, most important, in the questions it continually uses to shape and frame the corporate conversation.

Get The Right People

The ability to sense whether the right things are going on is largely a function of one's own background and capabilities. Boards today need people who live regularly in the world of technology, and who are in strong positions to identify intuitively whether the corporation's technology makes sense and is sufficient. Boards of traditionally technology-intense companies tend to gravitate toward members with strong technology backgrounds. PerkinElmer (nyse: PSI - news ->people ), where I'm currently a director, is focused on global technology leadership in three business areas--life sciences, optoelectronics and analytical instruments. Of the nine-member board, three of us have strong backgrounds in life science technology and three in information technology. Our knowledge and skills in these areas give the board a collective perspective for listening and gauging technology progress.

Shape The Right Agenda

The board's agenda is its primary mechanism for getting the exposure it needs across many areas to judge whether the right things are being done in each. Technology needs to figure prominently in that agenda. A chief technologist with whom I worked for several years used to say that the role of the technology organizations within the firm was to prepare a "buffet"--a rich assortment of technology-based possibilities for the corporation--while management's job was to have sufficient "taste" to eat from the buffet with wisdom and foresight. The board must ensure that both elements of this feast are in place: a rich assortment of ideas, and leaders with the ability to select wisely among them. The agenda must include time spent in witnessing the breadth and depth of ideas and the way that the leaders are choosing among them. The agenda of PerkinElmer's board includes a disciplined approach to exposing members to the company's technology, including regular tours to key research facilities. Directors are given hands-on exposure to research in progress and opportunities to talk directly with research leaders. Another useful way to shape the agenda is through the formation of a board committee specifically focused on technology discussions. When I was on the board of Allergan (nyse: AGN - news ->people ), a specialty pharmaceutical firm, we formed a committee that met regularly, giving those of us with technology backgrounds the time to explore the research of the firm more intimately than agendas of the full board might reasonably allow. More important, getting to know the people who were technology leaders in greater depth enabled the committee to understand their decision-making styles more fully and to gauge their "taste."

Ask The Right Questions

Five years ago, my colleagues at the Concours Group published a list of ten questions that boards should be asking about information technology (Directorship, July/August 1997). Recently updated, with ten new questions that reflect today's business environment, this list remains a valuable tool for stimulating the right sorts of conversations within the boardroom about information technology, and technology broadly.

1. Is the company leveraging technology in our most important business initiatives? What are the company's five most important strategic initiatives, and what role will technology play in the success of each? Conversely, what proportion of technology resources is devoted to these initiatives? How well does the company align its technology and business strategies? Information technology can serve business strategy in profound ways--as the means of dramatically improving the performance and integration of major business processes, as a catalyst for business innovation, as the foundation for new business models and marketplace relationships. Don't push technology for its own sake. Keep in mind your market needs and organizational readiness. And start with the basic question: How strategic is IT to our business today and tomorrow?

2. Do we have the platforms necessary for success today...and tomorrow? Can we present a consistent and personalized face to our customers? Are we connected to our marketplace? How much do we really know about our customers--and our non-customers--and how is technology helping us gain these insights? Today good technology is becoming the key to having the basic requirements for competition in many industries. Being "easy to do business with" is the name of the game; customers demand that a company show them one face. Suppliers, distributors, financial institutions and partners expect companies to have the ability to be seamlessly linked. And mastering the rapid changes in the external environment can only be done through the rigorous application of technology to processes that gain insights into both operations and markets. CARE USA, the nonprofit relief organization, provides an interesting example of the role a board member can play in developing platforms for success. John Morgridge, chairman of Cisco Systems (nasdaq: CSCO - news ->people ) and a member of CARE's board, came up with a unique program that helped set up reliable communication networks in underdeveloped countries to provide faster and better responses during emergencies; a common communications network for a consortium of international relief organizations; and learning technologies to speed learning in the field. The program, called Cisco Fellows, allowed Cisco employees to work for CARE without benefits and with minimal salary from Cisco. All these tasks would have been virtually impossible for CARE to do with its internal IT resources. The technology focus of the board encouraged senior executives at CARE to consider a more strategic role for technology in general and IT in particular.

3. Are our people, broadly, throughout the corporation, capable of using information and technology effectively? A number of years ago, I led a series of seminars designed for companies that were deemed the "best of the best" in their respective areas. One of the most interesting insights I took away from that experience was completely unexpected: It was the consistent pattern of technological sophistication that existed among the senior management of these diverse firms. I've thought about it many times since: It's not clear to me if personal mastery of technology is the chicken or the egg, but I'm convinced it is critical for leaders of successful firms, regardless of their specific focus. Boards should find out how literate the senior management of the firm is in technology, and demand excellence. The Field of Dreams formula, "If you build it, they will come," seldom works with IT. Most companies concentrate on improving the supply of information systems when they should also be concentrating on improving the demand. Not raising the demand but raising the ability of business people to use information systems in their work and decision making, and to work effectively with IT to design, develop and deploy new technology-enabled business capability. The board should insist upon adequate investment in systems-related education and training, regular audits of systems in use and ongoing executive participation in IT demand management.

4. Are we leveraging technology for business innovation and learning? With the shrinking lifespan of products and services in today's economy, a corporation cannot thrive without innovating, and it can't innovate without being adept at learning about the marketplace, about technological advances, about its own performance. Leveraging technology is key. IT is fundamental to corporate learning as a vehicle for delivering cost-effective, just-in-time employee training, and more. IT helps people find new information and discover the unexpected, supports the experimentation at the heart of business innovation and enables learners to connect with one another and share their knowledge and best practices. Of course, before investing heavily in the technology, the board should ensure that the corporation has an explicit learning agenda that details the things the organization needs to learn to improve the business, and how it can best go about learning these things.

5. Are we capitalizing on the business potential of the Internet? Directors don't need to know a lot about the technology of the Internet, but they do need to appreciate just how different the architecture of the Internet is and the business potential this creates. Under the Internet model, technological components are inherently modular and interconnectable, so information systems based on it are not limited to the functional silos or home locations for which they are first built. To an unprecedented degree, companies can integrate processes to boost end-to-end performance, integrate information to guide decision making and integrate with the marketplace to deepen relationships with customers and suppliers. There are huge implications for a corporation's organization and business processes that require board-level discussion and insight. And, although the burst of the dot-com bubble has left many corporations reluctant to jump on the e-business bandwagon, the board must recognize that some form of "e-business" is here to stay. With "clicks and mortar" business models, every company must consider how best to capitalize on Internet architecture.

6. Are we managing the resources effectively? Most companies today are in the middle of technology-related initiatives of unprecedented size, cost, complexity, risk and potential business value, particularly in the IT arena. The board needs to know if these investments are being soundly managed. Are we optimizing the supply and delivery of IT services? Are we getting the best return on our IT expenditures? Are our major initiatives on track to succeed? While you can't prove the payback of every dollar spent on IT, or determine a priori the right amount to spend, the board can insist on and hold people accountable for sound fiscal management of IT resources. This includes understanding IT capabilities and investment needs relative to the competition, following a long-term investment plan for technology infrastructure, demonstrating declining unit costs, meeting return-on-investment targets for automation projects and keeping budgetary promises on business initiatives where IT is but a piece of the puzzle. Although the business payoff of many IT expenditures may be difficult to measure, don't let people use that as an excuse not to try. The board should note who makes the case for IT investments. In most cases, it should be the business executives whose organizations stand to benefit most. The board should monitor the quality of the business process for governing IT, insist that IT resources be deployed in pursuit of specific business outcomes and help executive management avoid the unproductive extremes of wholesale centralization and decentralization of IT.

7. Is our management and shareholder information of the highest accuracy and integrity? Recent accounting scandals have demonstrated just how incomplete, unreliable and subject to manipulation a company's books can be. The pressure on boards to prevent such abuse has grown intense. Directors should not only probe rigorously into financial and operational performance but also examine how the numbers are generated. How well do information systems support prompt reporting, automated controls, highlighting of exceptions and transparency of financial management processes? The board should also be attuned to how business executives use information: Do they seek new data and manage by facts or massage the data to tell a good story? While good systems do not guarantee against abuse, they can provide safeguards and help build a culture of attention to information, including its timeliness, accuracy and communication.

8. Are we leveraging IT to ensure business continuity? Since Sept. 11, 2001, companies have redoubled their efforts to safeguard key business assets and prepare for their rapid recovery in case of major business disruption. For IT, this means more than backing up everyday information systems and recovering data centers and networks. That's because technology has special roles to play in business continuity: getting geographically dispersed teams back to work, reestablishing key business processes and customer relationships with all possible speed and borrowing resources from business partners. The board should rigorously review business continuity plans and the role that technology plays, or could play, in them.

9. Do we have the right technology partners? The days of complete vertical integration seem like ancient history. Functionally and economically, a company cannot do everything well. Central questions of business model design include what's important enough to do in-house, what to let others do for you and how to select the best partners and manage the relationships for maximum mutual benefit. These same principles apply to technology. In IT, reliance on hardware, software and network vendors has always been high, and reliance on IT services providers--some of the best of them offshore--continues to grow rapidly. The more important IT is to the business, the more important its partners are to the business. Getting the balance right is the key: Outsourcing too little is an economic waste, but outsourcing too much is a business risk, no matter how close the relationships with outside partners. The board should insist that management be explicit about what capabilities, including IT capabilities, are needed in-house and why.

10. Do we have the right technology leadership? Our research on technology leadership points to the critical importance of getting the right person in the chair, someone whose skills and capabilities mirror the role that technology is meant to play within the company's strategy. Just as the role and focus of a CFO will vary between a bank and a manufacturer, so the role of the technology leader will vary with the strategic and operational importance of technology to the business. For example, in information technology, the CIO may concentrate on building global infrastructure to integrate the business, may be a central player in business innovation of all types or may direct IT services sourced predominantly from outside the company. And as the business importance of IT continues to rise, the CIO may become more and more a business leader, responsible for educating the rest of the executive team and the board regarding the business potential of IT. As part of its business strategy for technology use, the board must articulate and prioritize the roles it needs the leadership to fill and make sure that people with the right "taste" are at the helm. Special thanks to Concours Group colleagues, including Bob Morison, Vaughan Merlyn and Eileen Birge, and to our strategic partners at Infosys for their help in shaping the boardroom questions.

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Tamara Erickson is a member of the board of directors of the Concours Group, a professional service firm specializing in the intersection of technology and business, and CEO of its Global Consulting Group. She is a director of PerkinElmer. She is a former member of the board of Allergan, where she served as chairman of the Corporate Governance Committee. She is the co-author of Third- Generation R&D: Managing the Link to Corporate Strategy, published in 1991 by Harvard Business School Press.