Why successful companies have IT leadership on their board
Last updated on January 31st, 2020
Businesses whose boards have strong digital skills enjoy benefits including 17% greater profits, 34% higher return on assets and 38% faster revenue growth according to a report by MIT SMR.
Any of those advantages would put a company in a powerful place against their competitors, so how does this one difference deliver all three? And if it’s so impactful, why do so few businesses have IT on their board?
How does having IT on the board make such a difference?
IT and business alignment
A major reason for the difference in capability is that businesses without IT leadership on the board commonly have a siloed or even antagonistic view of IT. In these environments, IT is often labelled as a non-contributor to the business since they aren’t directly creating revenue. To make things worse, an uninformed board rarely considers the essential work IT does to allow the revenue-generating departments to succeed.
Resentment easily grows between departments in this scenario and causes in-fighting, loss of talent and a stressful work environment. This leads to long-lasting reputational damage, a reduction in business productivity and ultimately, lower revenue.
Once senior IT executives are present on the board though, they can clearly communicate IT’s value, potential and contributions. Improving alignment and collaboration whilst reducing friction across the business.
Lower technical debt
Digitally-strong leadership is aware of the concept of technical debt and invest intelligently to eliminate it. Businesses without IT executives or their IT support provider on their board, are rarely even aware of technical debt and make flawed business decisions as a result.
Problems accelerate for non-savvy businesses if misconceptions such as IT being a ‘necessary evil’ or a business ‘cost’ get out of control and begin influencing the board’s decisions. This causes technical debt to accumulate even faster – narrowing cash flow, increasing job disengagement and lowering the business’ productivity ceiling.
If IT has a voice on the board, they can address these misconceptions and release the stranglehold on investment and advancement they cause. This reduces technical debt, improves day to day operations (and thus profits) and re-opens the gates to innovation by strategically investing when appropriate opportunities arise.
IT is held accountable at a high level
It might sound crude, but if someone’s job or ego isn’t at risk, genuine change and progress don’t happen. Having board members who are accountable for IT multiplies the impetus for delivering on IT’s full value and encourages greater performance. This ultimately accelerates project delivery and the achievement of companywide and departmental KPIs.
Having a CIO, or a CIO-level representative from your support provider present on your board means the knowledge and accountability to deliver real change is in place. But realistically, the entire board, not just one person, should be accountable for IT’s performance since IT underpins the whole business and is where a competitive advantage lies.
IT and business strategies support one another
In businesses without IT representation on the board, the strategic direction of IT rarely fits with the overall business strategy and maybe even works in a competing direction.
A simple example of misalignment would be if the business wanted to increase customer engagement and service, but IT had an ongoing implementation of a business management solution like ERP or Practice Management with a poor CRM system built-in.
If IT had representation on the board, they could have seen the misalignment and raised it prior to purchase. Even if the software was already bought, they could have reviewed an additional CRM product that integrates with the other line of business applications and makes up for the existing solution’s shortfalls. Whilst there would be additional costs here, the value and ROI would be clearly defined in advance by a CIO level exec, with support from Marketing leadership.
IT on the board can also lead to other projects which deliver on the business’ strategy. This would create overarching benefits, from back-office automation in any sector through to shop floor management systems in manufacturing, and perhaps AI or general process improvements in legal firms.
However, more commonly than misaligned strategies, businesses without IT on their board rarely have a real IT strategy at all. Usually just having a budget and a refresh cycle documented; putting them far behind the pack.
A more pressing attitude to risk management
A board without IT representation can place a disproportionate amount of focus on extraneous risks whilst critical IT risks go unaddressed. Even if IT has a solution to hand, the board may still deny funding since they don’t understand its importance.
Consequently, increased downtime, business disruption and lost money should be expected as the underlying infrastructure becomes neglected. Downtime alone costs the average business about £4,300 per minute – a painful sum for a non-savvy board’s inaction.
But downtime is not the only risk a board without IT presence will fail to address. Cyber-security, reputational damage, data loss, data theft and many other critical issues will go neglected without the correct emphasis from IT.
When IT has their place on the board, the correct emphasis is placed on IT risks since there’s an inherent understanding of their importance. Pressing issues can be correctly raised, evaluated and solved by top-down management and thus downtime, disruption and the associated costs can all be reduced.
If you look at a CIO’s job description, you’ll see requirements like:
- Create business value through technology.
- Strategic planning of business growth objectives.
- Ensure tech systems and procedures lead to outcomes in line with business goals.
- Oversee the development of customer service platforms.
- Manage IT and development team personnel.
- Approve vendor negotiations and IT architecture.
- Information risk management.
- Establish IT policies, strategies, and standards.
- Develop and approve technology futures and budgets.
Beneath the IT-specific language, these are all essential skills for a board member to have. Without IT executives or your IT support provider present at board-level, these are skills you’re missing out on.
But specific skills aren’t the only thing boards with no IT representation miss out on. Thanks to their unique mindset, a proven business executive with vast knowledge of Information Technology and its application can challenge assumptions and find opportunities in overlooked areas.
Why do so few businesses have IT present on their board?
Based on all these factors, it would be reasonable to assume that every business already has or is planning to give IT a place on their board. However, you’d be wrong.
For a start, most IT support providers lack a mature enough offering to include true board-level assistance. This makes it nearly impossible for businesses who outsource their IT to have IT present on their board. (IT support providers with this level of ability do exist, but they’re rare.)
Many businesses are also still stuck in a phase where they ‘tolerate’ IT, rather than seeing its value-enhancing potential.
However, the most common reason IT doesn’t have board-level representation is that many businesses simply don’t have the budget to hire an IT specialist with board-worthy skills and experience.
You may realise the illogic in this excuse. Whilst such an employee’s salary may be large, it would likely be a fraction of the 17% increased revenue a savvy board is worth, let alone the potential at the bottom line. However, many businesses are driven by short-term flat costs and are subsequently incapable of seeing the value they’re missing out on.
But there’s a reason that excuse makes even less sense and it’s that, if you’re smart, getting the skills doesn’t cost a lot either.
Taking advantage of an outsourced service like a CIO on-demand service gives you access to exactly the same calibre of seasoned IT executive, without the costs, risks and hassle of hiring and leading an internal big hitter.
If you’re interested in gaining a competitive advantage and increasing your revenue with QuoStar’s CIO-on-demand service, book a discovery call today.