Only 2% of FTSE 350 boards include a CIO – Report recommends having a board-level CTO or CIO

Only 2% of FTSE 350 companies have a technology specialist in the boardroom, according to new report which recommends placing a CIO or CTO on the board to drive digital strategy.

The research by interim management provider Russam GMS argues that a CIO has a crucial role in ensuring that companies successfully adapt to technological developments, by analysing developments and guiding organisational change.

[Also read: How CIOs can influence the board and CEO |NHS Blood and Transplant Chief Digital Officer Aaron Powell discusses securing influence in the boardroom]

Lisa Heneghan, partner at KPMG’s CIO advisory service in the UK, has previously told this title the absnce of CIOs on the board makes it difficult to communicate the benefits of IT to their companies.

“Within the British market, we find that at some of the major institutions, many CIOs are called in to answer the board’s queries, rather than to offer advice as equal stakes board members,” she told CIO UK. “This dynamic needs to be articulated by CIOs directly to their boards, and not with the CFO serving as an intermediary.”

Almost two thirds of the companies have no digital or technology expertise on their boards at all. Of those boardrooms that do, the majority are in the form of non-executive directors, often removed from day-to-day activities and the ground-level impact of technology.

Those companies that don’t employ a CIO cite a scarcity of available talent, a lack of understanding of technology, a reluctance to change and the tendency for the career to come from IT as some of the explanations.

Research by CIO UK suggests the situation has improved in recent years. In the 2016 edition of the CIO 100, 43% of CIOs said they were now a member of their organisation’s board of directors, up from 37% in the previous year. But an organisational divide still limits progress.

Business first, technology second

Digital strategist Ade McCormack believes a CIO should separate themselves from technology management and ensure they are a business leader first and a CIO second. Company culture has opened up to this in recent years, with technology executives increasingly empowered to transform their organisations and invest in digital initiatives.

“Go back a few years and many CEOs would have seen IT as operationally but not strategically important and so would have had a technology manager in mind when recruiting their CIO,” he told CIO UK.

A report issued by CIO UK at the start of 2016 supports his claims. The CIOs interviewed said their role was now more focused on business than on IT, with driving business innovation the top priority for 2016 for 61% of CIOs.

But boardroom perceptions don’t always complement CIO priorities. While more than half the CIOs said the board saw technology as primarily a way to improve business, CIOs often aren’t as valued for promoting innovation and strategy. Some 21% thought the board viewed technology as fundamentally an operational business process. Only 2% said their board felt the technology department was a home of innovation.

CIO reluctance

Boardroom membership isn’t a universal ambition for CIOs. A handful of of CIOs interviewed for the CIO 100 noted anecdotally that the reality of the responsibilities on the board can be far less glamourous than many expect.

“The most important issue to consider is whether CIOs in the main have the aspiration to be on the board,” says McCormack. “I feel we are being unfair to the average CIO for goading them into developing a whole new skillset having both worked so hard to climb the technology management career mountain and now peddling flat out to keep the factory lights on despite the increasing number of moving parts and decreasing budget.”

There can also be professional benefits to keeping a CIO away from the board. Matt Ballantine cited the example of a CIO who went from reporting to a CEO to a CFO as evidence that a seat on the board isn’t always beneficial.

The move gave him “half of his week back” to focus on strategy, and actually led to more one-to-one time with the CEO than he had inside the boardroom. The CIO did add, however, that his time on the board brought contacts that helped him in his new position.

McCormack argues that there is untapped potential for the boardroom in the CIO ranks, and recommends a mentoring ecosystem to encourage CIOs.

“Maybe apprenticeship is the way forward?” he says. “It would be great if we could engineer our industry such that our best CIOs become mentors to the next generation. Once we have this coaching/mentoring ecosystem in place I think the next career step for the CIO should be the CEO!”

Diversity in the boardroom

Research shows that groups with a range or races, genders, sexual orientations, ages and experiences are more innovative than homogeneous ones, as they encourage collaborative thinking and better understand the array of stakeholders. Despite this, only 49% of FTSE 350 and 55% of FTSE 100 companies have met the target of 25% female representation at board levels.

“There are simply not enough female CIOs and current level of female IT heads is nowhere near what could be deemed as acceptable,” says Heneghan. “While I acknowledge that IT is a particularly difficult area to attract female candidates, the change must come from within.”

The Russam GMS resport suggests that technology may in fact be more open to women than other fields. Two out of eight CTOs on FTSE 350 boards are women, reaching the 25% target, a figure which improves to 29% in the 125 companies with a board member who has digital or technological experience.

Another area of concern cited in the report is the variety of ages in boardrooms. New skills are harder to learn with age, but 80% of FTSE 350 board members are between 50 and 70 years old. Cutting-edge technology is normally the preserve of the young, but they usually lack the business skills of their more senior colleagues.

Attracting the skills of young digital natives without alienating older generations or neglecting their own expertise is a delicate balancing act. With the speed of technological development, a strategy that constantly prioritises the new would mean a ceaseless turnover of staff, as new expertise quickly consign old ones to the past.

Changes coming?

The role of the CIO will only grow in importance, as a post-Brexit UK competes for customers with its former colleagues, tempering the budgetary gains made after recovery from the 2008 financial crisis.

For CIOs outside the boardroom, the report recommends using a champion non-executive to ensure communication feeds up the company structure. But it stops short of advocating for the immediate appointment of a CIO at each company.

Companies unprepared to add a full-time CIO to their boards are advised to appoint an interim change manager to lay the necessary foundations that will make a permanent appointment successful. Rather than just digitising existing methods, this entails a comprehensive adaptation from the entire company.

But this current caution is only temporary. “We believe it is only a matter of time before every company assigns a Chief Technology Officer to lead this ongoing development”, the report predicts, “and before that position should then earn board status.”