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.
Diversity on boards has improved over the past decade. Yet history shows us that in times of stress and crisis, both diversity and its necessary counterpart, inclusion, tend to suffer.
For one, there is the flight to safety, or to people who feel familiar and have been through different business cycles before. While this is a natural response, it will implicitly close the door on some non-traditional board candidates. We’ve already seen this. One of our financial services clients spent months sketching out the new, forward-looking director archetypes it hoped to attract to invigorate its board. Now, however, the company is focused on deep financial acumen and past crisis experience in its search for new directors, setting aside the desire for more diverse and innovative perspectives for the time being.
Inclusion is also threatened in this environment. Directors may be under pressure to make decisions quickly, and without perfect information. The loudest voices in the room are most likely to hold sway, while newer board members (who often offer the most diverse thinking) may not feel empowered, nor encouraged, to speak up. As we’ve observed boards recently, we’ve seen this phenomenon as well. In one group, these newer directors tried to contribute, but never quite made it into the main flow of the conversation as successfully as the established directors. In other groups, we’ve seen directors – women in particular – simply stay on the sidelines when heated discussions erupt, an inclination that is exacerbated by the stilted dynamic of video meetings.
How can boards avoid these pitfalls and maximize the value of diversity? In times like these, the role of the board chair is more important than ever. We have analyzed the behaviors that characterize the best board chairs, based on our recent survey of 750 directors globally. Not surprisingly, one of these critical behaviors focuses on cultivating an inclusive environment in which diverse perspectives are actively sought out. A board leader who can help fellow directors and the CEO ensure that diverse viewpoints are included in every discussion and decision is essential to maximizing the value of each director on the board.
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.”
• Reinforce positive cultural norms coming out of this period due to intimacy and frequency of connections:
As boards meet more often during this period, albeit by video, some chairs have found it to be an opportunity to strengthen board culture and relationships. “The current situation has made people more open because it is completely unprecedented,” said Anjali Bansal, board chair for Mumbai-based Dena Bank until last year and currently a board director at Siemens Ltd. India, Delhivery, and Tata Power. With no playbook, “the established bureaucrat in Delhi is now engaging with the start-up founder from Bangalore to collaborate.”
• Accelerate contributions: Some boards have started pairing new members with more tenured members to help them acclimate to the group. While this may be more challenging in light of virtual meetings, it is not impossible and can yield great rewards.
Whatever situation you see on your board, recognize that diversity and inclusion dynamics are at play in nearly every discussion, even when they are not explicitly named. While many unproductive behaviors are the result of unconscious biases, they are not insurmountable. Board chairs – and indeed all directors – who commit to hearing diverse viewpoints and leading inclusively can make a big difference in how well their boards weather the current and coming storms.