[Update: I wrote this post originally for HBR.org. It's now live in shortened form on Harvard Business Review's site: http://blogs.hbr.org/cs/2010/09/it_in_the_age_of_empowered_employees.html.]

Peter Hambling, CIO of Lloyd’s of London, the venerable insurer, has made Facebook a priority for customer communications that required board approval. But more on that later. First, some background . . .

It's the nature of things. Some people look for ways to do things better — and that includes your employees. Some of your employees are questing for a better way to get things done. If there's a better way out there, they'll find it. That's a good thing because the thing they're trying to do better is their job. Serve your customers. Solve your business problems. Improve your operations.

It's always been true: Incremental innovation and process improvements have always come from those closest to the problem. It's the basis of kaizen, a system where employees continually improve manufacturing processes. It's also a founding principle of Six Sigma — tap employees' relentless, incremental quality improvements.

The same is true today in the way employees are harnessing consumer technologies — social, mobile, video, and cloud. They are improving how they do their jobs and solving your customer and business problems. And it's not just a few employees. In fact, it's a critical mass of employees. In a survey of more than 4,000 US information workers, we found that 37% are using do-it-yourself technologies without IT’s permission. LinkedIn, Google Docs, Smartsheet.com, Facebook, iPads, YouTube, Dropbox, Flipboard — the list is endless and growing. Many of these scenarios are complete do-it-yourself projects. Here are four small examples:

  • Want to ask me business questions on Facebook? Piece of cake, I'll just friend you.
  • BYO iPhones for email, apps, and Internet access outside my clients' door? Yep, I bought one last year. I'm looking at iPads now.
  • Google Sites and Docs to exchange documents with partners? Sure, I can spin up a free site or IT can spend the $50/user/year and make it secure.
  • YouTube to post fix-it-yourself videos for tough service problems? My kid's good with a Flip camera. She can film me doing the fix myself.

In all of these real cases, an employee figured out a better way to solve a customer or business problem without IT's help. Call it the consumerization of IT; call it harnessing the groundswell; call it Technology Populism (as we have done in this recent report for Forrester customers). It's all the same thing: individuals harnessing readily available social, mobile, video, and cloud technology to solve customer and business problems.

In our new book, Empowered, we call these covert innovators HEROes — highly empowered and resourceful operatives. HEROes are those employees that feel empowered to solve customer problems and act resourcefully by using whatever technology they need to. HEROes comprise 20% of the US information workforce, but your industry may have many more or many fewer highly empowered and resourceful operatives.

It's all well and good to have employees solving customer problems. But chaos and rogue behavior is not OK. So to identify the employee initiatives that are worth pursuing and figure out how to make them safe and enterprise-grade, your IT organization needs to get involved. (Check out our project scoring tool to find out the effort and value of your project.) And sometimes it's the CIO that breaks the news to the rest of the firm that these technologies are not only OK, they're vital to success.

And that brings us back to Peter Hambling, the CIO of Lloyd’s of London.

Hambling, a CIO with business chops, spoke at Forrester's IT Forum in Cascais, outside of Lisbon, Portugal, in June 2010. Together with Marcus Aldrick, Lloyd’s new chief information security officer, Hambling described the role of IT at Lloyd’s. In a nutshell, IT is embedded in the business, sitting side-by-side with underwriters, claims processors, risk managers, client service staff, and sales teams to solve tough problems every day, remove barriers to business success, and build new applications that empower employees to solve customer problems.

Peter also shared a story about Facebook and iPhone. It's by now a familiar story. A sales person wants to use Facebook to talk to a client. An underwriter wants to use a smartphone to access key account and policy information while away from their computer. The business manager and IT security professional fear the unknown and shut down both solutions.

What's unique is what Hambling did about it. As a CIO with business acumen, he understood that he and his IT organization needed a new contract with business managers and employees that allowed him to help with technology solutions while sharing the responsibility for business risk with employees and managers. To get it done, he took the business case to the board of directors and got permission to proceed with caution and with a clear eye on the tradeoff between business value and business risk.

Peter and Marcus understand this important source of new business value: harnessing the innovation of employees closest to the problem. They didn't stop with Facebook and iPhone. They've also embedded IT staff directly into the cubicle farms of business employees; they've built innovative solutions with teams comprised of business and IT employees; they've created applications that empower employees to understand global risk through a familiar interactive map. They created a new contract with business managers and employees that gives IT professionals a place in the business.

So how does Lloyd’s of London’s strategy relate to empowering employees to solve customer problems, the thesis of our new book, Empowered? Peter is executing against one of the key action items that we discovered: Make new technology risk a business problem to be managed rather than an IT problem to be stifled. And that requires a new way of thinking and of working, something that Peter Hambling and Marcus Aldrick exemplify.

We spoke with hundreds of people in researching the book and in discovering their solutions to these thorny empowered technology problems we identified a new contract that's emerging between IT, business managers, and employees. We call it the HERO Compact and it looks like this:

As you see in the HERO Compact, there is a real give and take needed between employees, managers, and IT in this empowered era. Employees need to step up and behave responsibly (which means HR needs to be involved). Business managers need to roll up their sleeves and learn enough about the technology to understand the potential risks. (Managers also need to encourage and reward experimentation.) IT needs to assess and mitigate technology risk. And that means IT staff need to be much closer to business employees and activities so they can help with technology platforms. And everybody must put technology-induced risk into its proper business context. It's a new set of priorities all the way around.

Are you building a new contract to empower employees to solve the problems of empowered customers? Are you running into barriers? Finding successes? In either case, I'd love to hear about it.