It’s a natural human impulse to check one’s own networks first when looking for board candidates. Leaders might not pause to consider how their networks reflect similar schools, career paths, age, or ethnicity. Boards assembled via closed networks miss the possibilities that board diversity brings: outsider experience helps companies innovate, identify new opportunities, and avoid risk.
Institutional investors who’ve embraced Environmental, Social and Corporate Governance (ESG) principles now perceive greater value when boards include minorities and women. Most businesses employ a diverse workforce and serve diverse customers; these stakeholders want senior leaders who know their world and represent them. A diverse board generates an array of perspectives that brings strength and balance to decision-making. Studies show that diversity correlates with strong financial performance.
Here, we provide advice and tips on how to recruit for board diversity, as long-term transformational steps and as near-term recruiting tactics.
Board Diversity How-to: 7 Long-Term Strategies
Ultimately, diversity is about the caliber and viewpoint of each director, and how diverse views coalesce in an environment where opposing opinions are welcomed.
- As a first step, consider current policies and practices: have they resulted in racial, ethnic and gender diversity on the board? It’s especially timely to review policies since legislation and lawsuits over board diversity are in the news.
- As the board reviews current practices and policies, consider also the definition of diversity. Ask if it’s relevant to the company’s broader business environment, and if eventual achievement of diversity as the board defines it will alleviate current or future market pressure for a more-diverse board.
- Next, determine a goal. Consider percentages and the number of board positions, as well as race, ethnicity and gender objectives. Ask whether the company will benefit from disclosing board diversity goals; it’s a step several firms have taken in anticipation of investors’ requests for this information.
- In some companies, the healthy practice of delivering robust evaluations of the board and its members has devolved into a perfunctory checkbox exercise. Where this is the case, refresh the process to include a whole-board self-evaluation complemented with assessments of the individual directors. Use the resulting information to determine the skills and qualities new directors should possess. Expect difficult conversations to arise from this step.
- Commit to strategic board refreshment. Diversity, innovation, and growth can all suffer if boards don’t refresh themselves periodically. While 49% of directors surveyed felt a peer needed replacing, nearly a third of them reported no change in board membership post-evaluation. The data suggest a reluctance to address underperformance of directors.
- Make sure the board has a succession plan as a matter of policy. Use board evaluation feedback and business strategy changes to keep the plan up-to-date.
- Pair any efforts toward board diversity with practices to support inclusion as well. Strive especially for diversity among committee chairs, board chairs, and lead directors. Note whether all directors are vocal in decision-making; ensure all views are received with respect.
Board Diversity How-to: 7 Near-Term Tactics
“By expanding the analysis to include the full range of competencies sought and the experiential, demographic and personal attributes that form perspective, a nominating committee can act with greater awareness of the variables at work in shaping a board.”
– Russell Reynolds Associates, Different Is Better: Why Diversity Matters in the Boardroom
- Consider current board composition in contrast to needs for the next three to five years. Use board evaluations and strategic plans to develop a profile of future skill and experience requirements.
- Evaluate the expertise and competencies held by each current board member and identify what may be lacking from the board as a whole. Go beyond conventional gap analysis that focuses on skills alone to consider:
- Functional and industry experience
- Accomplishments and education
- Gender, race, ethnicity, regional and generational cohorts
- Personality (including resilience, tolerance of ambiguity, and cognitive and communication styles)
- Develop a skill matrix as the foundation for a board candidate screening process. Use the matrix to drive board consensus on search criteria. This is an opportunity to ask “What qualities do we need to prompt new thinking about doing business differently?”
- Branch out to discover highly skilled candidates from different backgrounds. (We still live in a world where most new board members are found through personal referrals. Whether intentionally or not, limiting the candidate pool this way can introduce unconscious bias and look like cronyism to stakeholders.)
- Draw upon – and contribute to – Diligent’s Director Network to identify qualified board candidates. Users can search by criteria including age, gender, expertise, past positions, education and activities, and even see related board member data to steer clear of interlocks. Diligent Director Network creates the ability to source new profiles, including those with an emphasis on diversity, through a unique and trusted nominations process. Diligent Nominations provides additional data and analytics to help improve the board. It features the largest global governance data set for boards so they stay current with opportunities and can reduce governance risks. Demos are easy to arrange. Additionally, Diligent’s Modern Leadership Initiative currently encompasses over 700,000 CEOs, board directors and executives who are impacting diversity, equity and inclusion at more than 16,000 organizations worldwide. Organizations like this provide opportunities to recruit, recommend, and build a pool of diverse board candidates. Only with equal opportunities to contribute can the benefits of board diversity be fully realized.
- Expand professional networks by serving organizations that promote leadership development in populations that are underrepresented on boards today.
Now is the time to bring more innovative thinking to your board. “Who are the board members that can raise the right questions and put things in context, so you can think about how to do business differently?”
- Ascend Pan-Asian Leaders
- Athena Alliance
- Blacknorth Initiative
- Board Ready
- Diversity in Boardrooms
- How Women Lead
- Latino Corporate Directors Association
- The Executive Leadership Council
- Women for Economic and Leadership Development
- Out Leadership’s Quorum
- Succinct, clear expression of respectfully-presented viewpoints
- Records of success with diverse constituencies and difficult initiatives
- Openness to learning from others’ perspectives
Diverse experience and differing perspectives bring balance and strength to boards. Boards that pursue diversity and realize its benefits are setting themselves up to succeed. A board that embodies diversity is better-equipped to respond to shareholders and other stakeholders who increasingly value diverse leadership.