Category: Technology

Straighten Up and Fly Right: IT Risk Governance for Non-Techie Directors

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Virginia Gambale

Jet Blue Director Virginia Gambale heard the news about the airline’s fed-up flight attendant—the one who exited the plane via the emergency slide, cursing passengers as he touched down on the tarmac—well before some of the company’s senior executives. Social media savvy Virginia uses a web tool to track all mention of companies on whose boards she sits, and as soon as someone tweeted news of the incident, she was on it.

 Virginia, a former CIO with Merrill Lynch and Bankers Trust, shared the story at NACD’s Director Professionalism®—The Master Class, held this week in Clearwater, FL. She was one of a number of dedicated NACD members honing her board leadership skills and using peer expertise to identify and explore innovative solutions to persistent and emerging challenges.

Virginia urged her peers with non-IT backgrounds to become more involved in oversight of the company’s technology strategy. “Ask questions,” she said. “If people tell you that deadlines are being missed, that delivery of services isn’t possible, or that it’s just too complicated to get something done, then you don’t have the right strategy and you may need to change your CIO. Ask the CIO to talk about allocation of resources and find out how the dollars are spent between maintenance and innovation. You can make the same judgments as you would on any other area of the business.”

 “Ask ‘What is our model for technology leadership?’” advises Virginia, and ask to be walked through the governance model and strategy for partners and communications with customers. “Read the company culture: Is IT a partner or service provider? How closely integrated is it with your lines of business? What, why and where are you outsourcing, and what effect is that having on your risk? Virtual roads and highways need to be maintained, but you can outsource a lot of this and pay only for what you use,” she said.

Virginia urges boards to make sure they have at least one person charged with asking these and other questions. “It can be helpful to have a technology and operations
sub-committee sitting under audit or risk,” she recommends, especially if the company needs to find a new CIO. Failing this, the board should consider hiring an outside consultant.

“Security breaches, brand tarnish, information leaks or, at worst, a death can do your company real harm,” said the director who joined the Jet Blue board around the time of the Valentine’s Day “Ice Incident.” And, she added, “You can’t risk disintermediation—the business boneyard is filled with companies where the strategists at board and C-suite level failed to ask the right questions and fooled themselves for too long.”

“Today, every man, woman and child has access to instant information,” she reminded the group. “Use social media intelligently—it can supply you with useful information about what your customers think. And remember, if a mind created it, a mind can break it. Be mindful of the need for ongoing vigilance and sound practice in information security.”

Other directors sharing their expertise with peers attending NACD’s Master Class included Office Depot Compensation Rear Admiral (Retired) Chairman Marty Evans, Winn Dixie Director Charlie Garcia, who discussed the implications of America’s growing Hispanic population for board composition, and Major General (Retired) Hawthorne “Peet” Proctor, who spoke about the characteristics of exemplary board leadership.

To learn more about NACD’s Director Professionalism-The Master Class in 2011, click here. Already attended the Master Class? Contact fellowships@NACDonline.org to find out how you can become a 2011 NACD Board Leadership Fellow.

Technology, Democracy and the End of Top-Down Leadership?

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A recent conversation with one of our members via the NACD LinkedIn Group has prompted me to think about how social media might affect the work of companies, the behavior of shareowners, and thus the leadership of boards of directors.

The conversation started like this: I attended an elearning conference and, inspired by some of the sessions, decided to solicit the views of NACD membership on how the emergence of social media might require new skills and mind-sets from those charged with company oversight: the board of directors.

I had only one response. “Neil” wrote: “Other than the notion that social media plays out quickly, are the oversight issues any different from what they were in the past? In the pre-social media world, companies I served had policies (and less formally, unwritten “understandings”) in place with respect to media/public communications and crisis management. Other than establishing a proper framework that includes setting policy and ensuring there’s a system of assuring (or at least optimizing) compliance and reviewing the policy/program from time to time as appropriate, I see actual oversight (i.e., implementing, monitoring and executing) as the realm of management.”

Hmmm. I had meant the general role of overseer, not just the oversight of social media initiatives. It’s also interesting that my correspondent immediately equated social media with crisis whereas my colleagues at the conference instead saw it as a valuable tool for collaboration. People talking to each other, sharing ideas and swapping stories can be, of course, both a boon and a threat. Perhaps what it threatens most is the long-established idea of control and command leadership, as practiced by so many boards and C-suites. Thus, if implementing, monitoring and executing business activities remain the responsibility of management, oversight of these activities today could, for good or ill, be provided directly by stakeholders, moving at a speed and with a force that is completely out of kilter with the careful deliberations of the best boards.

At the conference, presenter Phil Cowcill (follow him on Twitter here) shared the idea that “technology makes companies naked,” forcing a new transparency that private meetings and closely held notes could once have hidden. “Invite technology into the room,” he advised, “for you cannot keep it out. The value of collaboration is more valuable than the threat of the loss of control. Learn to treat your stakeholders as partners and you will benefit from knowing what they think and feel.” The baseline extrapolation for a board would be to make intelligent use of the social media environment to solicit relevant third-party views on business issues, winnowing worldwide views to supplement the information provided in the board book.

Bob Reisner, former vice president of strategic planning for the U.S. Postal Service, agrees that the speed and ease of information sharing and communications poses leadership challenges for boards and management teams. “Shareowners, customers, employees, suppliers and communities can now insist that they be included in guiding the shape of the future,” he said, “and that will either be frustrating and bewildering for those who seek to maintain control, or enriching and transformational for those who anticipate the wave and act.” Bob is writing a book—provisionally entitled Democratizing Transformation—and shared some of his thoughts when we talked recently in Washington, DC. “Constituents have access to their own collaborative tools, official or not,” he said. “When they engage the official media and have the same collaborative tools, boards will have to work out how and when to engage them in governing and shaping the future. The democratic impulse can’t be stopped or contained (without new costs), and so it will require leaders to define new rules and embrace a new, collaborative, open, transformational style. Increasing risk and uncertainty has raised constituent activism, and many traditional constituents (and some new ones) will view the future as too important to trust to management [and boards] alone”

You may still receive the information that informs your board decisions via the board book, the newspaper delivered daily to the front door, and your deep experience of the industry and company you serve. You may still cherish your leather seat at the beautiful board table, and the tenor of the high-level discussions that take place behind closed doors. And you may be right that your board has the people, commitment and brain power to continue to act as a strategic asset to the company, and as an effective monitor of management. But keep an eye on the social media tsunami, and follow this drill to ride the giant wave:

Bring stakeowners and shareowners into decision making—solicit information, listen, learn and act, and encourage company managers to do the same. Support company initiatives that encourage collaborative problem-solving at all levels of the organization.

And above all, don’t leave it too late.

Time to Tone Up—Do You Need a Personal Trainer for the Social Media Age?

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“Technology leaves companies naked and it’s time to buff up,” says Phil Cowcill, facilitating a session at an e-learning conference I am attending this week in San Francisco.

WeightlifterHe believes all boards and companies should embark on a workout schedule and, if necessary, hire a personal trainer so they look good under the scrutiny of stakeholders using social media. “You can’t keep technology out of the room,” Cowcill says, “so use it to learn what your stakeholders really think, feel and see.”

Your skin, in addition to being toned and oiled, needs to be thick, says Cowcill, for sometimes your stakeholders will say and do things that you feel threaten the company, but if you learn to think of them as partners rather than threats— NACD Webinar people with whom you have collaborative dialogue—then you will gain more value than you will by playing defensively.

We discuss the recent decision by Gap, Inc. to withdraw their new logo in response to customer feedback on Twitter and Facebook.

  • Was Gap really committed to the logo or did they just float it on Facebook to test the response?
  • What have they gained in column inches and from appearing to be responsive to their customers?
  • What have they learned that will inform new product launches and strategic initiatives?

However you address the questions above, your answers will demonstrate the need for new thinking around stakeholder—including shareowner—engagement. How good does your board’s body look in the social media age? Leave your comments below.