Prioritizing Boardroom Diversity And Inclusion Across Different Business Cycles
In good times and bad, the core mandate of a board is unchanged: Ensure the future success of the organization. That requires a diverse range of people and perspectives to capture the full mosaic of emerging trends.
The Corporate Board Member article, “Prioritizing Boardroom Diversity And Inclusion Across Different Business Cycles," was written by Russell Reynolds Associates Consultants Laura Mantoura, Tina Shah Paikeday, Dean Stamoulis and Laura Sanderson on the necessity of diversity on boards and how organizations can get there. The article is excerpted below.
Boards today face weighty decisions around liquidity, business continuity and employee safety that will ultimately determine whether or not their organizations survive. Amid these critical issues, however, it is important to ensure that diversity and inclusion doesn't fall off the agenda, and that they continue to build on past progress.
Recent events in the U.S. have shown how complacency regarding diversity and inclusion can lead to disastrous results. A series of racial injustices, including the death of George Floyd and ensuing protests, have exposed the fact that discrimination is still an ugly reality. As the experience of Black Americans has come into sharper focus, people who identify with other marginalized groups shared similar stories, revealing fracture lines that run farther and deeper than many realized.
These events highlight how important – and how complex — it is for boards to understand and address a wide variety of stakeholder groups, both external and internal. While corporate boards struggle with diversity and inclusion as much as any other group, they should prioritize both of these elements now more than ever.
In good times and bad, the core mandate of a board is unchanged: Ensure the future success of the organization.
To accomplish this during a disruptive period like we're experiencing today, boards need a diverse range of people and perspectives that help them capture the full mosaic of emerging trends, mitigate the risks to the organization and support management to harness future value creation opportunities. As one board chair told us, “Boards and management have a bias towards positive scenario planning. The only antidote is to have a diversity of opinions around the table that will constructively challenge rosy projections."
They also need this diversity to help them serve as role models, and to communicate empathically and effectively with the different stakeholder groups the company serves. This need is further heightened in our present circumstances as boards focus even more on such topics as human capital and social contract commitments, risk mitigation, and the implications of complete upending of business models. Disruption means perspectives from next-generation and digitally savvy leaders matter more than ever. Several recent research studies reinforce the idea that higher levels of board diversity in terms of age, gender, backgrounds and other measures are strongly correlated with better company outcomes, including lower stock price volatility, more consistent R&D spending and better returns on invested capital.
Key takeaways for board chairs and directors
We've spoken to some of the best board chairs we know to find out how they're managing these dynamics in the crisis. They offer a range of solutions, all of which underscore what we view as best practice.
- Rethink board composition: The best boards seek and support true diversity of thought, as well as diverse demographic categories. This often means looking beyond the classic CEO title or P&L experience for new members with relevant functional C-level responsibilities, who have managed at scale across multiple functions and organizations.
Don't wait for a raised hand: “The chair's responsibility is to make sure to get people's views," said Noreen Doyle, board chair for Newmont Corp. “Some people are naturally inclined to intervene where they have expertise and others need to be encouraged." To meet this challenge, many board chairs canvass opinions from new members in advance of meetings and find opportune times to give them the floor during meetings. One board chair goes so far as to recommend proactively calling out less-tenured individuals “as they are typically the ones who have the best eye to what we need to do next."
To read the full article, click here.