The Dawning of the Tech-Savvy Board

Technology changes faster than boards do. (Well, technology changes faster than most things do. And boards tend to change slowly, so it stands to reason.) But today’s boards of directors have more reason than ever to keep pace. New tools, new devices, new apps, and new versions of software all have constant impact on the workflow, capacity, and even composition of boards.

According to TechZulu, the role of boards has remained more constant over the past 60 years than has their composition. Seasoned executives from a given industry previously populated corporate boards based solely on their accumulated experience in that field. Today, however, diverse perspective informed by demographics and professional experience is a coveted board asset in both the for-profit and nonprofit sectors.

Given the increasing prevalence of technology in organizations, as well as in board members’ pockets, it is essential to include technology expertise at the board table. In the past, the alignment of technology with organizational output and production meant that technology prowess was needed only at the operational level. Now, as technology supports external-facing functions like “marketing, competitive intelligence, and communication”, it aligns with board concerns about vision, strategic direction, and accountability.

As TechZulu further notes, early education is now technology-based, so today’s youth is more involved with these new areas of technology focus and “the presence of younger, technology-trained (professionals) has increased in industries all across the globe.” So the boardroom looks different as members bring unique talents and perspective that combine to bring well-rounded expertise to the table. As a result, the board works differently, too.

What previously required the physical presence of board members now is accessible at their fingertips. Tablets (iPad and Android) provide an obvious example of how technology impacts – and enhances — board members’ productivity. The right app provides them with the ability to annotate meeting materials, schedule events, access historical data, communicate with others, and possibly vote (depending on state laws) at all times, from anywhere.

Still, true integration of technology requires more than the right expert, device, or app. According to an expert with the Harvard Business Review, “technology is the most important agent of change today,” yet many industries (and organizations) employ outdated technology.

Consumer banking, for example, has added layers of technology since the 1960s without removing much and now a “total overhaul” is warranted, according to Harvard Business Review. The expert cites other examples, such as the use of fax machines in sharing healthcare data rather than the cloud and chalkboards in educational settings. Utilities only recently began to leverage technological advancements by adding sensors to the electric grid and installing smart meters for residential customers.

Harvard Business Review lays blame for the “lag” in technology overhauls on the fact that such efforts require more time than most executives serve, plus more money – and risk – than most organizations can afford. The risk and cost of inaction, however, seem to be quickly outpacing investment as technology continues to redefine entire industries (ie. Apple transformed the music and communications industries and Amazon re-invented retail).

Nonprofit organizations are especially vulnerable to avoidance around technology overhauls as resources are perpetually limited and expertise is often elusive. When such initiatives do occur, they often are reactive in nature, rather than innovative; for instance, a $15M fundraising organization still processed over 200 transactions per week by hand and finally recognized the need to modernize systems. The chief executive deferred to the IT Director, who lacked experience in executing such grand projects, so a longtime volunteer stepped in to provide discounted IT consulting services for the duration of the overhaul. Unfortunately, neither professional brought the expertise required to assess the organization’s comprehensive technology needs and the new, custom-built IT system was already antiquated by the time it was completed, notably beyond budget and due date.

The board, in this case, lacked the technology savvy not only to ensure the success of the project, but to anticipate organizational capacity and hold the chief executive accountable for system modernization in the first place. Without technology expertise at the table, asks Harvard Business Review, how can a board…make an educated decision and follow it through to the end of a project while adapting the design of an overhaul to take advantage of new technologies and consumer behavior?

The author proposes the following principle to ensure that corporate governance includes sufficient oversight of technology:

• Add a techie to your board. For best results, identify someone who remains involved with technology in a relevant industry and brings a track record of both success and failure, from which she or he has learned.
• Don’t rely entirely on advisers. The technical advisers and consultants on which boards rely tend toward generic advice about the competitive landscape, which keeps management from falling behind but doesn’t inspire innovation.
• Ask tough questions about technology spending. Spending too little is just as dangerous as spending too much, so boards must ensure they are not incentivizing management to make do or “layer” old technology atop older technology to save money.
• Understand the cyber threat. New technology opens up vulnerabilities even as it creates value and boards must understand the risk-benefit equation of their choices.

Of course, the influence of technology champions must not focus solely on organization-wide systems. Sometimes the board itself needs the encouragement of experts to evolve its culture and practices through technology advancement. At the same time, it’s not enough for a tech-savvy board member to promote the purchase of a relevant tools, like board management software and tablets. Too often board culture enables the selective shelving of technology by individual board members, which can sabotage their implementation and effectiveness.

Today’s boards govern in a new environment. Heightened scrutiny from regulators and shareholders or stakeholders alike require fast action, responsiveness, and transparency from board members. Board members, then, must maintain unprecedented levels of awareness, accountability, and engagement. Antiquated systems, such as those relying upon paper-based board materials and physical presence, do not accommodate their modern lifestyles and changing needs as responsible board members. Boards must keep pace with the technological advancements that promise improvement in both organizational operations and board function.