Feature

Pulling new strings

Chief information officers are hankering for busman's holidays: taking time off to advise other companies on their corporate strategies, often for very little pay. Julia Vowler asks why and how do heads of IT benefit?

Heads of IT lust after non-executive directorships, those advisory roles on the boards of companies which may only entail a day or two a month out of the office. A survey of chief information officers by CIO Connect (Computer Weekly, 27 April) finds that "the most-coveted non-CIO role is a non-executive directorship in another company. Nearly half of CIOs have a strong interest in obtaining such a position."

According to the survey, heads of IT have their career sights set on jobs with profit and loss responsibility, such as becoming chief operating officers or even chief executives, and they see taking on non-executive directorships as the key to their own organisation's board-room.

"The non-executive directorship is more common as CIOs increasingly become business people," says John Handby, chief executive of top IT chiefs' networking forum CIO Connect. "When they were parked as techies it was a far more difficult move to make."

Is a non-executive directorship something you should do? "Absolutely," says Justin Gilbert of head-hunter Odgers Ray Berndtson.

A non-executive directorship can help your current role as head of ITand it can give you a second career beyond being a CIO, when the non-exec directorship may be a timely component in a post-salary portfolio of jobs.

Being a non-executive director provides board experience at a time when that is an increasing passport to professional success. "As a career move any kind of board experience is tremendously valuable," says Brinley Platts, membership director at the Impact Programme for senior IT directors, which runs a series of development days for CIOs as non-executive directors.

However, he warns that being a non-executive director is not a cut-price route to get you on to the board at your own company.

Nevertheless, it can deliver very useful experience of life on the board and confer valuable exposure, says the Institute of Directors.

But when many non-executive directors have a background in finance, what does a CIO bring to the table? Gilbert says organisations that are going through major change and transformation programmes find appointing a CIO as a non-executive director particularly useful. Heads of IT can use their existing experience of and expertise in such programmes, which are heavily dependent on IT.

"CIOs can bring large-scale corporate change programme experience," says Platts. "And change management is a major core competency for all organisations."

As the head of IT you have a broad, aerial view of your own organisation. IT stretches across the enterprise, and so that clear vision will prove invaluable in a non-executive directorship. Moreover, heads of IT are used to operating as influencers across areas of the business where they have no direct fiefdom - again, very much the way that a non-executive director has to behave.

CIOs work by gaining consensus and winning hearts and minds, and these are good skills for a non-executive director. "IT is a huge corporate expenditure, so CIOs need to be able to justify that spend, which makes them very good liaison people. They make links very well," says Gilbert. "And, unlike a sales director, who is only judged monthly when the sales figures come in, a CIO is judged every single moment, which makes them enormously answerable."

However, heads of IT who have non-executive directorships have to remember that they are not there to run the other company - let alone its IT. "Your role is advisory, not hands-on," says Platts. "You are there to be part of corporate governance, advise on strategic issues and protect shareholders."

Chris Montagnon, former head of IT at Sainsbury's and now a non-executive director at retail software company Novasoft, agrees, "Your power is via the vote and through your influence. You have to act by remote control."

If you have concerns about the company's internal IT, the most you can do, says Platts, is ask the CIO to make a presentation to the board and offer a mentoring shoulder to the CIO, especially if it is a much smaller or newer company than your own.

"You are not there to check the functionality of their systems, but to check that they have covered the issue of the functionality of their systems," Montagnon points out.

Heads of IT in user organisations are in a strong position to be offered non-executive directorships at IT suppliers. The reason for this is less subtle: having a CIO of a major company on the board lends kudos and respectability to an IT company, especially a start-up. It can serve to reassure users and win new clients and, perhaps most importantly, provide invaluable contacts with potential customers at very senior levels through existing CIOnetworks.

"You will be of interest to medium-sized or small players because you understand their customer space, lend credibility and know people," says Platts.

But despite the growing enthusiasm among CIOs to take on non-executive directorships, is there a downside? Several, say the experts, and all must be factored in and assessed before going down this route.

"Being a non-executive director can be very time-consuming," warns Gilbert.

On paper a non-executive director may only be required to work 12 days a year - and that includes attending board meetings - but combining this with the day job is not easy. "It may be only one day a month but it will inevitably take more time than that. If you are a globe-trotting CIO can you really commit that time to being a non-executive director?" asks Gilbert.

Montagnon says, "When I was CIO I had no time to sleep, let alone take on a non-executive director's role."

It is also something that must not cause problems on the home turf. "Your employment contract might say you need to get permission," says Platts. And although your employer will probably encourage you to do it, you will be expected to take a holiday rather than do it in your firm's time.

If your non-executive directorship is with an IT supplier, the caveat applies even more. "There probably would not be any conflict of interest or difficulty, but if, say, there is a legal dispute [over a supplier contract] then it would be inappropriate for you to be a non-executive director," he warns.

As well as taking up more time than you might easily spare from the day job, a non-executive directorship may not be very rewarding financially. At small companies, it could pay as little as £5,000 a year, but even at the top end it will only be about the £40,000-a-year mark. According to the Institute of Directors, a non-executive directorship at FTSE 250 companies will pay about £23,000 a year, and FTSE 100 businesses will pay about £44,000.

The CIO Connect survey shows that 27% of CIOs earn more than £200,000 a year, and the "great majority" make between £100,000 and £200,000 a year, so the pay for holding a non-executive directorship can look like peanuts.

"You should not look at it as a money-making enterprise," warns Gilbert. "The experience you gain is the driver, not the money."

That may be true, says Handby, but without some kind of financial recompense few CIOs would undertake being a non-executive director, certainly not if it is part of a portfolio career. "One non-executive directorship won't keep you in beer," he says.

More critical than remuneration, however, is the question of responsibility. A non-executive director has legal liabilities and failure to give them sufficient attention could result in lawsuits from shareholders and, in some cases, the threat of imprisonment.

"It is a serious commitment," says Handby, "Some heads of ITtaking on non-executive directorships do not always think that through."

You must have insurance to cover your new legal responsibilities, but don't rely on personal indemnity insurance, warns Handby. The company at which you are a non-executive director should ensure it has the appropriate insurance for its board members but if it is a start-up organisation, you should not take it for granted that this is in place.

Even if there is no legal fall-out, being associated with a company that is less than pristine can be damaging. "Your current employer will not be too happy, and it will reflect badly on your career," warns Gilbert.

Given the degree of responsibility a non-executive director undertakes, you should pick such posts carefully. "Because you can go to gaol you need to carry out due diligence," advises Platts. "If you have any reservations, turn the directorship down."

Montagnon agrees, "Get detailed information about the company and the issues it faces. You should make sure it will not go belly up and that you will be supplied with the information you need. You may not be told the whole truth by the board so you have to go and see what is happening in the field. You need to be financially savvy and be confident you will be able to spot things that are going wrong."

There is no recipe for being offered such a directorship, says Handby. "It is more of a networking activity. For example, I am a non-exec of a company that I used when I was a CIO. As a customer I built up a relationship of trust with the business," he says.

Venture capitalists, too, can be keen to see experienced CIOs on the boards of start-up businesses, says Handby.

Montagnon, similarly, was invited to be a non-executive director at a company run by someone who used to work with him. One of his key roles there is to be a mentor, he says, a neutral, but experienced, source of advice.

A key target for your networking activities has to be the executive search firms. "Get on the head-hunters' radar screen for non-executive directors," recommends Gilbert. "Increasingly head-hunters are looking for people to fill these jobs on behalf of companies which have major change coming up. You need to make it obvious to the head-hunters what you can do."

Do not be overly ambitious, however. "You can probably rule out the FTSE 100," says Platts, but the companies in the FTSE 250 and FTSE 500 lists are within the CIO's grasp.

Despite the recommendations of the Higgs report, commissioned for the Department of Trade & Industry, to increase the pool of non-executive directors that organisations draw from, the chances are firms will still go for people with board experience, warns Platts.

The Impact Programme surveyed 33 of its CIO participants and found that about a third were non-executive directors on the non-PLC boards of other companies.

However, Platts does see another avenue opening up for CIOs with ambitions to become a non-executive director. "One stepping stone is via the not-for-profit sector," he says. "There are about 100 major programmes run by government departments, and some senior [non-executive director] IT experience could really catch potential problems."

Moreover, most government appointments are advertised on the Cabinet Office website, Platts adds.

The other not-for-profit category is charities. But to work with them you have to make a commitment that goes beyond professional, he says. "Don't do anything that does not sit with your personal values," he warns.

Is the current enthusiasm to become a non-executive director a passing fad? "No," says Handby. "It will simply normalise into the CIO career structure. It certainly will not go away now that heads of IT are becoming increasingly business-oriented. Their interest in being a non-executive director, and their desirability as one, will go up.

"It is becoming the mark of someone who is a rising senior executive, and wants to be seen in that mould."

Key tasks of one non-executive directorship  

Chris Montagnon, former head of IT at Sainsbury's, is now a non-executive director of retail software company Novasoft. His role, he says, consists of: 

  • Keeping a close eye on the numbers. You have to understand the accounts and the balance sheet for which you have a legal responsibility 
  • Supporting the managing director. This is a mentoring role, acting as a sounding board and a source of neutral advice, especially when the chief executive is less experienced than you 
  • Understanding the business. With a background in IT and retail, Montagnon can see how Novasoft can best serve its market 
  • Promoting the company. This is done when Montagnon participates in broad spectrum activities, such as chairing conferences 
  • Assisting in selling. "I add gravitas," says Montagnon. He also encourages Novasoft to look at contract profitability 
  • Developing strategy. Because of his experience and the fact that he has no executive power, his key role is to encourage Novasoft to look ahead.

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This was first published in May 2004

 

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