Tackling fresh opportunities. That’s what profitable companies do. Delivering consistent, stellar results. That’s what winning companies do. Whatever it takes, winning companies make it happen. With that in mind, there is one opportunity that has been acknowledged by leading companies but not yet fully realized—fielding a board of directors with diverse voices.
Diversity manifests in a number of ways—in experience, in skills, in gender, in ethnicity, in cultural background, in nationality and in race. But boards are still a ways off from making this a reality. Take the issue of gender diversity. Boards today are still far from parity. In a world where Silicon Valley gives birth to billion-dollar companies in just two or three years, most companies have not delivered a diverse board in 20. A host of research shows that diverse boards deliver better results—as much as 15% better with gender diversity, according to a 2015 McKinsey study—yet the “go-slow” approach suggests a need for continued muscle-building in governance.
According to Equilar, in 2017, 20.9% of board seats were held by women at the 500 largest companies by revenue. More importantly, women held only 8.4% of board leadership positions—lead directors or non-executive chairs. This underrepresentation of not just women but other forms of diversity as well is getting harder to explain given that 61% of directors feel a need for greater diversity of viewpoints and backgrounds on their boards, according to a KPMG study. That’s why big investors like State Street and BlackRock have called on boards to address their composition, gender diversity in particular.
While a first step in introducing diversity has been simply to get diverse candidates on boards, a logical next step in strengthening governance is to deliberately position diverse members—and leaders—on committees when their experience can make a difference. This remains an opportunity ripe with potential. It doesn’t mean homogenous committees can’t make good decisions, only that diverse ones, by applying a broader cross section of experience to today’s more multifaceted problems, can frequently make decisions even better.
The question is how to speed things up and realize the potential of this opportunity. Common wisdom would suggest that boards start with further expanding diverse membership and then follow with creating greater committee and committee-leadership diversity. But like so many efforts, inertia can take over unless you apply a disciplined process to deliver measurable results:
All this will require faster change for the board as directors decide when to push diverse voices into committee and leadership roles. It will create more work as well during the onboarding of directors from less traditional backgrounds. But the benefits of selectively placing diverse voices in key positions—which can spark the innovation that leads to new billion-dollar businesses and opportunities—are impossible to dismiss. A proactive program to match diversity with strategic necessity through faster, disciplined planning, rotation and refreshment is no longer a “nice to have.” It is a fiduciary responsibility.
Blair Jones is a Managing Partner with Semler Brossy Consulting Group and a member of the Equilar Diversity Network Advisory Council.