Thinking about IT and the Board

The point of these writings, for the most part, is to offer some insight and observations that business managers, executives and directors of (primarily) non-technology companies to help better manage the role and function of IT within their organization. In October's Harvard Business Review, there is a quite good primer on board-level IT governance written by Richard Nolan and F. Warren McFarlan.

In "Information Technology and the Board of Directors" (p. 96 in print - subscribers can access here - non-subscribers can view an excerpt) Nolan and McFarlan lay out a succinct yet reasonably detailed framework for thinking about key issues of viewing IT as part of the corporate governance function, such as:

• What is the current role of the firm's IT operation - (Support, Factory, Turnaround or Strategic) -  I have always used somewhat different labels - Cost Leadership (Support), Operational Excellence (Factory) and Differentiation (Strategic). Also, I have always excluded "Turnaround" as a independent role because it should be getting turned around to something (i.e. one of the three other types) - but from a governance perspective, the key point is that board should expect to more thoroughly scrutinize relevant issues in a case of a turnaround.
• What sort of questions should the board ask for each type of IT operation?
• How often should they ask these questions?
• What is the role of a board IT expert? (see some of my comments in "IT Savvy Board Representation" from last year)
• How do you establish an IT governance committee on the board?

There are details within the article about which reasonable people can differ, but overall it is really quite a good piece and I would encourage any senior business manager or director to read it and discuss it with their other board members.

Comments

[Alan Calder]

The article is a good one and is generating some useful discussion. The challenge for the majority of boards is that they struggle to find non-executive directors who are adequately knowledgeable on IT to perform this function. This should not be reason not to set up the IT committee; what it does mean is that the IT committee may need to take external advice, on an ongoing basis, on the adequacy and effectiveness of its IT operations. Inevitably, this means further expense, but more important will be the requirement for members of the committee to use that advice constructively and sensibly.

[Paul Leenards]

If you take the 4 modes from Nolan McFarlan or the three levels in your article then I feel that there is one level missing: level 0 or no need for more then a basic IT solution. It might be hard to believe that in this time and age there are companies who have little or no need for IT, but there are plenty. Specific small or midsize companies that will only use IT in a basic supportive role. And many of these companies have an IT person or small IT group that is trying to sell more IT Technology then is needed.
After reading the article of Nolan and McFarlan I agree that I'm not convinced of the added value of the turn-around mode. So, as far as I'm concerned there are 4 levels of IT needs for a company: None, Utility (Support or Cost Leadeship), Dependent (Factory or Operational Excellence) and Strategic (Differentiation).