We’ve all been there, and it’s probably happening somewhere right this very second: a meeting is going nowhere because the group dynamics are off. Maybe there are competing agendas. Maybe there are varying levels of knowledge about the topic at hand and the group get past the resulting communication breakdowns. Maybe they just don’t like each other or trust each other enough to say what’s on their minds. Whatever the reason, somewhere on this planet right now a group is splintering into subgroups.
Now, imagine that this group is the corporate board of a large organization that must make crucial decisions about vision, strategy, and large-scale resource allocations. On top of that, every decision must be made with value generation in mind – especially when it comes to information technology investments, which likely topped $5 trillion across the globe in 2024.
Rajiv Sabherwal, distinguished professor and Edwin and Karlee Bradberry Chair at Walton College, along with his coauthors, Moksh Matta (Simon Fraser University), Jinglu Jiang (Binghamton University) and Surinder Kahai (Binghamton University), examines how these various fault lines affect how corporate boards govern information technologies and generate value from them in “Blooming through the Cracks: The Effects of Fault Lines in Corporate Boards on Information-Value Technology.”
Instead of viewing a corporate board as a monolithic, cohesive unit that rationally acts towards a common purpose, Sabherwal and his coauthors view groups as including subgroups with fault lines among them. Their research accounts for the complex human dynamics that arise whenever a diverse collection of individuals come together as a group. As they show, the fault lines within corporate boards play a significant role in shaping strategies for generating value from IT investments.
Why Fault Lines Matter
Just as all boards are not monolithic, not all fault lines are the same: they come in many shapes and sizes. One thing that is constant about them, though, is that they can split a board into various subgroups. And the interactions between these subgroups can then influence how the board as whole makes its decisions. The three types that Sabherwal and his coauthors identify in corporate boards are knowledge-based fault lines, identity-based fault lines, and resource-based ones.
Knowledge-based fault lines arise when members have different levels of knowledge, education, expertise, or industry experience. For example, a board may have three members with deep technical knowledge and view IT investments along those lines, but it may also have three members whose background extends to financial matters who may view investments primarily through that lens. The interactions (and negotiations) between these subgroups can work to promote a more nuanced and diverse body of knowledge within the group.
Identity-based fault lines on a board are just what you’d expect: subgroups of this sort are based on social identities that individual board members may share with one another. The most common ones are gender, race and ethnicity, and age, but they’re not limited to just those.
Resource-based fault lines revolve around different levels of access to key resources and opportunities. For example, groups can develop resource-based fault lines around professional networks, time of service on the board, experience as a board member, and the level of influence or power within the board. For example, a board may have three directors who have served on the board for five or more years each and have developed a strong power and influence base within the industry. These board members' control over strategic assets and long-standing influence could create a power imbalance that leads to internal board conflicts when important decisions have to be made.
These fault lines may all seem intuitively negative, as they carry the potential to undermine effective governance and hurt value generation. Or, alternatively, we may intuitively think that a more diverse board – at least with respect to age, gender, and areas of expertise – almost automatically yields higher returns. Beyond the sheer scope of their work – analyzing 2,463 firms over an eleven-year span, what makes Sabherwal and his coauthors’ project useful is how it pushes us past our intuition and seeks to clarify the way these different fault lines affect IT value generation.
The Truth Behind Fault Lines
Not all fault lines have the same effects. While fault lines may create cracks, those cracks may also create much-needed room for growth and value generation. Sabherwal and his coauthors found that one fault line in particular had a markedly positive effect: knowledge-based fault lines. Strong knowledge-based fault lines within a board positively affects IT value generation because diverse knowledge backgrounds in subgroups allows for knowledge sharing and knowledge diversity across the entire board. The sharing opportunities that this broad range of perspectives, expertise, and insights allow for better decision-making and oversight when boards are evaluating complex IT initiatives.
But that’s not all – Sabherwal and his coauthors also found that the positive effects of these knowledge-based fault lines can also be amplified in munificent, non-hostile work environments that have high levels of resources, opportunities, and support. In short, if a board can share insights and interact well with one another, they can become an even greater catalyst for value generation. Their combined knowledge becomes all the more powerful in these sorts of environments.
Sabherwal and his coauthors’ study also had some surprising results when it came to identity- and resource-based fault lines. While many of us may intuit that these fault lines create conflict and stymy performance, no evidence was found that these fault lines have a significant impact on a firm’s ability to generate value from IT investments. Why this is the case may be up to future studies to determine, but the results suggest that the positive and negative effects seemingly cancel each other out. It could also be that these types of fault lines – while they may indeed cause social tension and disagreement – do not materially impact how boards make critical decisions on IT investments.
The diversity of knowledge and experience within the board thus seems to be of critical importance whereas differences based on social identity or access to key resources may be less of a factor in how boards make strategic, complex IT decisions.
How This Research Affects Industry
Prior information systems literature has explored board characteristics from a variety of angles, but what makes this study important is how it examines the internal dynamics of the board itself. This research thus brings some much-needed nuance to how we think about the sociological innerworkings of boards and the impact these social dynamics have on IT governance and value creation.
Board composition, whether forming a new board or refreshing an existing one, receives a noticeable amount of attention from policymakers, investors/shareholders, and the industry at large. Given Sabherwal and his coauthors’ research, organizations should pay careful attention to how directors can strengthen and add to the body of knowledge already present on the board. Depending on the industry, this may mean deliberately targeting board members with varied professional backgrounds, expertise, and experience. Doing so will ensure that these valuable areas of knowledge are not only present on the board, but that they differ across the subgroups present on the board.
Organizations should also safeguard that the board has good working dynamics, namely that it's less a minefield members must navigate but is instead a place where sharing information and interactions are natural.
Board connections also play a vital role, as boards with noticeable knowledge-based fault lines stand to gain the most from external knowledge sources. We all have limited time and attention to spare, and boards operate under these same resource constraints. Having strong ties to board members at other firms, industry experts, and other connections with expertise the board can leverage becomes ever more important. These connections improve boards’ ability to absorb, understand, and act on external sources of knowledge and experience when it comes to making key IT governance decisions – especially if the board is already structured to process and integrate new ideas in its subgroups.
The way that boards can share knowledge among its members via a wide set of easy-to-use technological tools also deserves attention. Boards thrive when knowledge is shared across knowledge-based fault lines, but organizations should make sure that boards can easily share this information. Sabherwal and his coauthors recommend that organizations invest in technologies that streamline intelligence gathering, such as dashboards or analytics platforms, and collaboration and communication via secure board portals and other similar tools. Even tools as simple and straightforward as document repositories and discussion forums can aid in knowledge sharing and amplify the benefits of knowledge diversity.
If your organization wants its board to spur IT value generation, it would do well to remember that unlocking IT value is not always about the technology itself. Unlocking IT value is often just as much about human dynamics and understanding how to better harness diverse sources of expertise when it comes to making strategic IT investments and critical decisions.
