I recently completed some research on the role that Boards of Directors play in technology governance. I posted an online survey to determine what the state of the practice actually was.
The results were pretty amazing -– to say the least. More than 50 senior technology executives responded to the survey. The findings benchmark the state of the practice -– and suggest how companies can improve business technology governance.
Boards of Directors are typically organized around committees with specific responsibilities, but Technology Committees are relatively rare.
Nearly all of the companies that do have Technology Committees on their Boards of Directors are technology companies. For example, HP, Cisco, Sun and Microsoft have Technology Committees just like they have Audit, Compensation and M&A Committees.
The difference is that technology company Technology Committees focus on corporate technology strategy -– which new products to develop and market -– and not on the internal use of computing and communications technology.
Put another way, these committees would not look at the desirability or risk of installing and enterprise resource planning application -– but they would look at investing in a new search engine to compete with Google.
The analysis of the survey data revealed all sorts of patterns and insights:
But the correlation of the 20% with the vertical industries represented in the survey indicated that companies that create, sell and support technology are the ones that have technology subcommittees of their boards.
These results dovetail with the findings regarding the board’s oversight of major and special technology projects, but suggest that nearly 80% of board meetings are not interrupted by technology discussions.
The data suggested that between-meeting-communication about technology matters is very infrequent. Only 14% communicate between meetings and 51% rarely or never communicate between meetings. 10% often communicate and 25% sometimes do.
The data indicates that the preferred mechanisms for governing technology are Executive Review Boards and Project Management offices. Relatively few companies have Technology Committees of their Boards of Directors.
We also know that there are several Fortune 1000 companies that have established Technology Committees of their Boards and that technology companies have do not focus on internal technology issues, challenges or opportunities.
Given the data -– and in some cases in spite of the data -– there are several recommendations I’d like to make:
The prescriptive literature suggests that it’s time for boards to assume more meaningful oversight of technology investments and strategies. The descriptive literature suggests that there’s relatively little board involvement in technology planning or oversight. The survey data that I collected supports the descriptive literature: there is relatively little board involvement in technology planning or oversight.
This is a pivotal time in the evolution of technology governance. Technology is simultaneously becoming commoditized and strategic. The cost keeps rising as well, with many companies now spending 5% or more of their annual gross revenue on technology.
While the majority of companies still use Technology Review Boards and Project Management Offices to govern technology (that govern well below Boards of Directors), companies whose technology budgets are growing and whose perception of technology is more strategic than operational should consider moving technology up the governance hierarchy to the board level.
What do you think? Should Boards of Directors get involved with technology -– or be kept at arms length (as they have for decades)?