By Debra CopeIt’s a truism in banking that technology is changing everything, and rapidly. A digital transformation is reshaping the competitive landscape and forcing many banks to think fast about how to deliver on client expectations. Inside banks, a business transformation is underway, too, as institutions seek technology tools needed to operate more efficiently and profitably.
Having technology expertise on the board itself is rapidly becoming an imperative.
“Our clients are looking for board-level perspective on the technology agendas for their institutions,” says Connie McCann, a partner with the Philadelphia office of Spencer Stuart, an executive search and leadership consulting firm, focusing on boards and financial services. “They want representation in the boardroom on how technology is disrupting and changing financial institutions now and in the future.”
A handful of banks have gone further, creating board-level technology committees. At MainStreet Bank, a $1.2 billion-asset bank in Fairfax, Virginia, the decision to create one coincided with Terry Saeger’s election to the board of directors in 2011.
As an executive in technology startups, Saeger was one of the bank’s first customers after it opened its doors in 2004 and received one of its first Small Business Administration loans. A tech committee isn’t seen as a must for many banks, but it made good sense for MainStreet because the bank has a strong technology focus itself. The bank was a pioneer in the Washington, D.C., market in offering check scanning and electronic and computer-based tools to its small business customers in what Saeger calls a “branch in your office model.”
CEO Jeff Dick was specifically looking for someone with a tech background when he recruited Saeger to the board, having gotten to know him well through the customer relationship. Saeger became chairman of the new board technology committee, consisting of four directors who meet quarterly.
That’s a classic way to find talent for the board, McCann says. “Community banks have a hidden advantage because they get to know the companies in their local footprint quite well. As they form close relationships with executives, they can potentially find a tech-savvy person who is interested in serving on their board.” Otherwise, she added, banks will typically use an outside adviser to recruit candidates.
Like most banks, MainStreet Bank already had a management technology committee, which works on day-to-day operational issues and brings strategic and compliance issues up to the board, Saeger says.
The board committee was formed to perform a different role by providing a high-level perspective on oversight and enterprise risk management as they relate to technology. For example, when the bank was considering multi-factor authentication for every employee, the management committee met with vendors and quickly got tactical. “Our responsibility was to ask the right questions to ensure the management team was thinking about the issue from a holistic, enterprise-wide perspective,” Saeger says.
McCann says she sees three types of technology talent that banks may consider. First, there are experts at the forefront of digital, artificial intelligence, blockchain and other types of innovation. Second, there are “chief information officer types of people with deep backgrounds in technology infrastructure, data centers, etc.,” she adds. This can also include cybersecurity, which has been a very important topic for bank boards. Third is the world of chief technology officers driving enterprise-level applications in areas such as user interface and experience.
Explains McCann: “Sometimes you can appeal to the hometown institution and attract some very good talent.” She notes that her firm recently recruited a head of cybersecurity from a large institution to a smaller bank, because the candidate was interested in the community and liked the opportunity to invest his talent in service of an institution that was focused on community.
A board member who speaks the language of technology can be very helpful in bridging discussions between the board, upper management and the information technology department. Saeger sees his role on the board as something of a technology guide and a translator. The board consists largely of business people from the community who are familiar with technology, but by no means expert in it, Saeger explains.
“Just as every bank has to have an independent financial expert on the board, it would make sense for every bank to have a designated tech person on the board,” Saeger says. “This could be an opportunity to bring on some younger board members who are digital natives.”