By Jack Vonder Heide
Director responsibility for IT risk and strategy has become more consequential as customers migrate to electronic delivery channels. New laws, guidance and regulations require a higher level of board focus on the IT area. At the same time, many directors still classify themselves as technology novices.
Technology is a continuum. People tend to develop a high degree of familiarity and expertise with technologies that were pervasive in their formative years. If a bank board is comprised of directors of varying ages, each member will generally bring a set of skills and a frame of mind that is characteristic of his or her generation.
A 75-year-old director, for example, may have no idea how to use an iPhone. However, the same director would easily be able to drive a stick shift car. Ask this director how Wi-Fi works and you will get a blank stare. But if you ask how a Hi-Fi worked, you will get a detailed explanation of proper warmup procedures, changing defective tubes, etc.
Most bank directors I have worked with have the natural ability to understand technology, but many feel overwhelmed by the rapid pace of change and the increasing level of personal responsibility they must assume for an area with which they don’t feel fully comfortable.
There are several steps that boards can take to improve the technical competence of directors and help them make better informed decisions.
First, recruit an outside director who has a deep understanding of technology. An ideal candidate would be a C-level executive who is currently working in the field – one who oversees the IT area of a well-respected large or middle-market company. A publicly traded organization, is best because the executive will have some familiarity with regulatory issues.
Second, form a board-level technology committee. This group would be chaired by the tech-savvy director and would include two or three other directors, plus key C-level officers from the technology, risk management, operations and business development areas of the bank.
Third, ask each board member to identify the specific technology areas that they would like to understand better. Then provide one-on-one or small group training. Some board members are visual learners who like examples, while others learn better by reading. It is important to discern how each person learns best and provide them with the type of instruction that will help them absorb and retain the information.
A good strategy for older directors is to explain technical topics in non-technical terms. I once worked with a board that was considering a proposal for increased bandwidth. Two of the directors could not grasp the concept until I said, “Imagine that that you are driving your car on Interstate 94 and all of a sudden traffic is reduced from four lanes to one lane.” There was an a-ha moment, and the bank got more bandwidth.
Fourth, have a technology-focused presentation at every board meeting and at every board retreat. Some of these presentations should focus on current issues like cybercrime, system upgrades, etc. while others address longer range strategic issues.
Fifth, decide what type of bank you are when it comes to technology. Do you want to be on the bleeding edge, where you will enjoy an early lead over your competitors by being the first bank in town to introduce something new?
Do you want to be a quick follower that observes what other banks are doing, and then copies those new technologies that seem to be working for them?
Do you want to be a straggler and wait until the last possible minute to give your customers what every other bank offers?
Finally, prioritize technology initiatives that enhance the customer experience and improve the bank’s bottom line. Every bank has limited resources, and getting a double return on investment is a goal worth pushing hard for.
A tech-savvy board is a successful board.