Knowledge Center: Expert Guidance
Five Steps You Can Take to Increase Your Board’s DiversitySubscribe to Culture Shaping 2/27/2015 Bonnie W. Gwin
Over the past five years, sitting and former CEOs and CFOs together claimed almost two-thirds of new appointments to Fortune 500 boards. While these executives clearly add a lot to the boardroom, this trend also means that diversity is limited – and not just ethnic and gender diversity but diversity of experiences as well. It is those different perspectives that often lead to new ideas, fresh perspectives and business value for a company. So how do you ensure a diversity of experiences and perspectives in your own boardroom? Here are five steps you can take:
- Rethink your default setting. You don’t have to begin with the premise that the ideal director must have CEO experience. CEOs certainly bring a lot of skills to the table. But many outstanding GMs and divisional heads possess the same skills that make CEOs such attractive candidates – strategic orientation, operational ability, and P&L experience. You might also consider presidents of universities, retired public servants who have led large government agencies, and retired career military officers. They, too, can bring qualities of executive leadership and experience in leading complex organizations that your board needs.
- Consider top functional leaders. Many boards have been reluctant to bring on executives with strictly functional depth, other than CFOs. But a director whose functional experience is relevant to a key area of your company’s strategy can add great value. If you’re in an industry where customer privacy, network security, and business recovery are critical, your board should have the necessary expertise to oversee cyber risk – expertise a CIO might provide. If you’re in a formerly heavily-regulated industry facing unfamiliar marketing challenges, an outstanding CMO could provide a much-needed customer-centric perspective. General Counsels with deep M&A expertise can be valuable if your company is growing rapidly through acquisition or is in a heavily regulated sector.
- Catch a rising star. By searching diligently, your board can also find younger executives on the fast track to the top. As a group, they’re generally more diverse than in the past and they will furnish many of tomorrow’s CEOs. Large US-based companies known for best practices in talent development are a good place to start. But because other boards are likely to look to these kinds of high-profiles companies first, you will face fierce competition for those who are genuinely qualified for board service. But there are many, less well known but equally impressive businesses with up and coming general managers on the CEO or similar track whom you can and should consider.
- Don’t rule out well-run private companies. Traditionally, many boards have been unwilling to look to private companies for board candidates. Private companies are sometimes seen as too small and too narrow to generate the scale and scope of experiences relevant for service on the board of a large, publicly-traded company. But the surge in private equity investment has been accompanied by the recruitment of strong public company trained leaders to the private company sector. And some dynamic private companies are adept at developing leadership skills and follow the same public company governance models you do.
- Insist on a diverse slate of candidates. The full board can and should require your Nominating Committee and its search firm, if you engage one, to present diverse slates of candidates for director openings. The full board can also review the criteria for new board members, considering not only diversity of gender and ethnicity, but also of geography, skill sets, industry background, and other experiences. This should enable you to look beyond CEOs and “well-rounded” directors for candidates with specific skills who can contribute directly to the strategic needs of the business.
Often, non-traditional candidates are seen as risky. But there is enormous risk in not diversifying your board. With a disciplined search process, you can create a more diverse board without courting risk. But you will have to make some extra effort in sourcing and assessing qualified candidates. The Nominating Committee may need to add the question of readiness to assessment and reference more extensively the farther they depart from traditional candidates. And mentoring/onboarding is even more important for the first time director.
None of those steps is particularly difficult. They require only the will to undertake them and due diligence in carrying them out. And in the long run, the extra effort is likely to deliver far more value to your board and the company than if you simply remain with the status quo.
This article originally appeared on LinkedIn as part of its “LinkedIn Influencers” series. For more articles by this author, follow her on LinkedIn by clicking here.