A New Boardroom Dynamic

Boards are getting bolshy. A study released last April by Mercer Delta Consulting, in conjunction with the Centre for Effective Organizations at the University of Southern California's Marshall School of Business, shows boards are exerting more influence and have greater independence from management. It found 93 percent of directors surveyed felt their board was independent of management to a "great" or "very great" extent, 95 percent that board members voice opinions that conflict with the CEO's view, and 73 percent said CEOs have less control over their boards "to some extent" or "to a great or very great extent".

"The past year was a crucial milestone in terms of the practical application of the governance reforms put forth in 2002," says Mercer Delta Consulting chairman Dr David Nadler. "These results reflect our own experience with boards, which is that many of them are not only doing the hard work to change their structures and comply with governance requirements, they are going beyond basic compliance and striving for optimal board effectiveness.

"What is also notable is that the changes under way have had a significant impact on boardroom dynamics, but that the board and management continue to work well together in the majority of cases," Nadler says. "The best CEOs have recognized that they must thoughtfully engage and lead their newly independent boards and they are seeing themselves as partners with the board in the governance process."

At the same time a 2005 study by Burson-Marsteller shows just 8 percent of Fortune Global 500 companies have CIO skills on their board, despite the fact that the stocks of those companies that do have outperformed the industry index by 9.2 percent per year since the CIO-skilled member was elected.

"If HP's [former] chairman and CEO Carly Fiorina is right when she says that 'every business decision triggers an IT event', high-performance boards must make way for technology know-how," the report says. Based on its research, Burson-Marsteller found that boardrooms need to open their doors to directors with technology skills and competencies in order to unleash innovation and economic growth.

Clearly, it is better for CIOs to be on boards where possible, but equally clearly, executives that snub the CIO's advice in favour of that of external influencers are serving up a recipe for chaos.

Yet according to a Gartner EXP report, much misunderstanding and suspicion remains among CEOs of CIOs and IT. Gartner points out that for an enterprise to be effective in using IT to drive innovation and growth, a good working relationship between the CEO and CIO is crucial. Most CEOs view their CIOs as effective operational leaders, it says, yet only a few view them as full business leaders. CIOs have an opportunity to build their relationship with their CEO and other stakeholders to increase their influence and to enhance the contribution of IS.

Gartner says in the discrepancy between the way the CEO views the CEO-CIO relationship and the way the CIO views this same relationship can lie a dangerous disconnect, limiting the value generated by information technology and the power of the executive team. Understanding the CEO's expectations and view of the CIO helps to create the right relationship based on personal style and enterprise need.

"The quality of the CEO-CIO relationship influences the CIO's effectiveness and success as a business leader and the value gained from information technology. CEOs are demanding and not always clear about their expectations. That can create a situation where their views are radically different from the CIO's perceptions, a situation fraught with risk for both.

"To succeed, CIOs need to understand the CEO's perspective on them, and on IT's role in the enterprise," Gartner says. But to do that effectively, they may need to do a better job of discovering just who is whispering in the CEO's ear when they are not around, and the messages those whisperers are delivering.

Successful CEOs are getting more from IT by building their CIO relationship. Getting CIO input into enterprise strategy has proved much more powerful than getting the CIO to execute a fixed strategy.