At a recent Conference Board webcast, Governance Watch: Social Technology in the Boardroom.
Bob Zukis, Chairman and CEO of Saaskwatch Systems (and a Senior Fellow in
the Governance Center) and Barry Libert, Chairman and CEO of OpenMatters,
argued that it will.
I hardly have to mention that social media is having a
profound impact on how business is done. Or that it is making a
significant change in how companies, their customers and their communities
relate to each other. But Bob and Barry stressed that those changes have a
fundamental impact on the nature of companies, and, therefore, on the
obligations of their Directors.
Social media allows large networks of individuals to
coalesce quickly around common concerns in a way that was previously
unimaginable. On the one hand, these networks can allow companies to
quickly identify issues with its products and services that might have gone
unnoticed until too late. On the other hand, these networks provide
anyone with a cause new leverage for forcing the company to react.
Moreover, the speed with which these networks changes the dynamics of the
relationship among a company, its customers, its investors, and its
Both speakers persuasively argued that Boards must
understand the social media landscape well enough to ensure that a company's
management has a plan for monitoring social media, looking for the useful
information and being prepared to react quickly to well-organized campaigns
demanding changes in the company.
No doubt, social media is forcing companies to be more
engaged with their outside communities. In fact, Bob and Barry argue that
companies will be forced to engage with and react to outside communities in a
way that is totally new, moving from an 'inside-out' perspective to
'outside-in'. As part of this engagement, companies will have to be more
transparent and responsive than they might have been in the past.
As an example of the global nature of the issue,
Starbucks ran out of branded coffee cups in Argentina. To be transparent
with its customers, it apologized on Facebook and Twitter that it had run out
and was using nationally manufactured cups.
Unfortunately, the wording of the apology was taken as insult by some of
Starbucks customers, who read the apology as an attack on Argentine
products. Their unhappiness went viral on Twitter, becoming the top
trending topic in Argentina in July. Starbucks responded to its unhappy
customers by the end of the day, resolving an issue that could have become
To give a sense of what 'real-time' means in the social
media world, one critic complained that Starbucks was too slow in
responding. Their initial apology was posted at 7:58 am; their subsequent
apology was posted at 4:07 pm. However, it appears that the viral nature of the
complaints died down shortly after the second apology was posted. It
would be interesting to know if the Twitter campaign had more than a transitory
effect on Starbuck's sales in Argentina, following the second apology.
Bob and Barry argue that the need to engage outside
communities, not just manage them, and turning the attention of a company from
'inside-out' to 'outside-in' will fundamentally change the way companies are
organized and run. Among other things, these changes will force a change
in the nature of management, from 'top-down' to 'leading from behind'.
Management will give more decision-making authority to the networked
communities. In addition, companies will rely increasingly on open-source
innovation to solve problems.
All of this lead Bob and Barry to conclude that Boards
should include a director who is expert in IT, that Boards should have a
standing committee on IT, and that IT issues should be part of the regular
agenda of the Board.
Bob and Barry were very persuasive in reaching their
conclusions. However, I have to admit that I remain agnostic. I
have no doubt that companies that understand how to take advantage of social
media are more likely to succeed than those that don't. Social media will
allow some new business models to drive out others. And companies will
have to engage with and react to outside communities using social media.
However, I do not expect this to fundamentally change
business organizations, any more than the introduction of previous technologies
forced fundamental changes in the nature of business organizations. At a
basic level, I believe that humans are predisposed to form generally
hierarchical organizations that look 'inside-out', whether in business,
government, religion, or criminal enterprises. And I do not believe that
social media will change that.
Nor do I believe that leadership will fundamentally
change, for similar reasons. Social media will give corporate leaders
more opportunity to 'consult' with the outside communities. But at the end of
the day, those leaders remain accountable for the decisions made. Some of
the leaders will be more interested in the listening to the networks, some
less; some will be data driven and some will innovate from the gut; but few
will want to give up the power and prestige that the accountability, and its
concomitant authority, gives them.
The remaining question, though, is whether Boards should
have a director with IT expertise. And my simple answer is, I don't
know. I am sure that Boards need to hear from experts in social media,
though that expertise might possibly come more from young social media
aficionados than from senior IT experts. Of course, it helps if Directors
are generally knowledgeable about social media and how they affect the
relationship among a company and its outside communities. I'm just not
sure that someone on the Board needs to be the expert.
So I open this question to you: Should Boards have
a director with IT expertise? Your analysis will be appreciated.
Read the rest of this article on the Governance Center Blog
Howard Bergman is a senior fellow with
The Conference Board Governance Center. Bergman was a member of 3M's
Office of General Counsel for 26 years (1985 - 2011) where he served as general
counsel, 3M Europe, Middle East and Africa (2004 - 2009), Assistant General
Counsel to 3M's Health Care Business (2000 - 2004) and Consumer & Office
Business (2010 - 2011). His responsibilities included providing legal and
business counsel to executives and their business teams in the US and
Europe/Middle East/Africa regarding strategic plans, business operations,
transactions, risk management, business conduct, and crisis management.
Following his retirement from 3M in 2011,
Howard has worked as Counselor-in-Residence at the University of Minnesota Law
School, developing business-oriented programs for the Law School's
Corporate Institute; Director of Conferences at The Sedona Conference,
a non-partisan research and educational institute dedicated to the advancement
of law and policy in the areas of complex litigation, antitrust law, and patent
litigation; and currently serves as Director of Development at the Center for World Religions,
Diplomacy and Conflict Resolution at George Mason University.
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