Adviser: calling all boardroom ostriches
Board members are all too aware that IT has a critical role to play in business success, so why don't they take ultimate responsibility?
I caught a glimpse of a press release from Telewest earlier this month, which led with the statement: ‘IT spend to decrease as boards lack faith in technology.’ Just a week earlier, I read an article with the headline ‘Board members must stop abdicating responsibility for security’. The security in question being IT security.
Most business managers and their advisors agree that effective use of IT is critical to a business’s success. Yet the Economic Intelligence Unit survey (undertaken on behalf of Telewest) found that less than half of those senior executives surveyed planned to boost IT spending in 2005, down from 58% in 2004.
On the other side of the fence, there is increasing frustration among IT professionals, as they perceive senior management failing to take ultimate responsibility for key areas of IT strategy. This frustration is only likely to increase as they see development budgets cut.
When trying to reconcile differing groups, a good starting point is to ascertain the reasons for their apparent distrust. A recurring theme of this debate has been the apparent lack of accountability of IT projects.
Finance professionals have an invaluable role here. By applying basic return on capital calculations to an IT proposal, the board can be provided with the material it needs to make an informed decision. Ongoing monitoring can then provide evidence for an informed decision to continue to fund development (or not, as the case may be).
There are other reasons why finance should also work closely with the IT department. It is quite likely that, in its initial stages, a project will have been considered from a purely technical perspective, having followed the brief of the IT manager. Furthermore, they may have only a limited understanding of the ways to appraise the financial viability of a project. Assistance from a friendly finance professional may help to identify financial benefits not necessarily considered from the outset, or at least to present the project in a manner that the board can more readily understand.
Presenting a good financial case is the only solution. It is too easy for senior management to delegate responsibility for IT strategy to ‘specialists’. But no board member can justify not having a clear understanding of such a critical business component. Ultimately, responsibility for all business activities lies with the board.
Many board members have had to develop an understanding of the principles of accounting and finance. Perhaps there is a need for senior managers to attend an ‘IT for non-IT managers’ course, in the same way as many non-finance executives attend a ‘finance for the non-financial managers’ course as a part of an executive development programme.
Most would agree that IT is critical to future success – but without a common understanding between board members and IT professionals there is a real risk that future success could be sacrificed.
Mark Holland is a partner in Baker Tilly’s information systems advisory group.