Tag Archive: board diversity

Maximizing Talent to Create a 21st Century Board

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Identifying what expertise is needed on the board and orchestrating different—if not conflicting—points of view into constructive conversation can be a challenge. During a session at the second annual NACD Diversity Symposium on the opening day of the Global Board Leaders’ Summit in Washington, DC, panelists James Lam, director and chair of the risk oversight committee at E-Trade Financial Corp. (E*TRADE); Myrna Soto, director of Spirit Airlines and CMS Energy Corp.; and Charlotte Whitmore, vice chair and chief, brand strategies, of Analytics Pros., discussed how boardroom talent and a robust mix of perspectives are critical to ensuring a company’s success.

Maximizing Talent to Create a 21st Century Board

Conversation centered around two themes:

1. Striking a Balance. When considering the future needs of the company, Lam recommended that directors think about their business and its risk profile and then consider the following questions: “What are the key megatrends that will impact the business?” and “What director skill sets will be needed to mitigate this potential impact?”

Considering the continuously growing list of threats and disruptors facing businesses—such as cybersecurity, globalism, and climate change—some boards debate the need to focus on recruiting subject-matter experts to help them oversee these risks. But panelists agreed that new perspectives should replace long-standing expertise.

“Seasoned directors can be a voice of reason,” Soto said. “New executives can be what you need to push the strategy. When you have that diversity of thought, you really challenge the strategy, but it comes down to the nominating committee and how it thinks about what the next director is going to bring to the table.”

Drawing on her own experience, Whitmore concurred. Whitmore is cofounder of the data analytics start-up, Analytics Pros, and knows what it’s like to both recruit directors whose business experiences are different from her own and to be recruited to a board because of her particular expertise. At her own company, Whitmore said she has learned from more seasoned directors that taking actions to grow the company too quickly might do more harm than good. “They bring a sensibility to corporate culture that’s not just about driving results,” she said. In her role as a director, she said her older colleagues often look to her data-analytics savvy to discover new ways to support the organization.

2. Facilitating Dialogue. Having diverse perspectives around the board table does the company no good unless they are heard. Effective director onboarding is vital to acquainting a new director with the company and establishing both the board’s expectations of the new recruit and what that director expects of fellow board members and management. A director’s ability to successfully contribute to the conversation is contingent on the conditions on which they were onboarded. Soto said that she turned down several directorships based on what she learned about the companies’ governance structures. Lam recalled having his own agenda during his onboarding at E*TRADE, ensuring, for example, that he was able to meet with the risk committee and senior management.

In addition, the lead director plays the very important role of ensuring that all directors are heard. When new directors are called upon to join the board of a company in crisis or during a transition—such as a CEO succession—the lead director can be instrumental in managing and balancing the perspectives and experiences represented around the table and getting the full board to a point where it feels comfortable not only in making major decisions, but also in communicating those decisions to stakeholders outside of the boardroom.

Unlocking Innovation Through Diversity

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The first panel at the 2016 Global Board Leaders’ Summit’s Diversity Symposium provided directors with real-life examples and related metrics from four executives who have successfully linked diversity with competitive advantage.

Unlocking Innovation Through Diversity

Leslie Mays, partner at Mercer, moderated the panel that included Rohini Anand, senior vice president and chief diversity officer, Sodexo; Phillip Goff, president and cofounder, Center for Policing Equity; Herschel R. Herndon, founder and president, HRH Global Connections; and Sonya F. Sepahban, director, Genomenon and Cooper Standard.

The panel suggested four essential steps to build a more diverse workforce and create value through innovation.

Start With the Board

Anand noted that because the Sodexo board does not take its commitment to diversity lightly, performance metrics for the CEO are directly tied to diversity initiatives. Sodexo, a facilities management company, sets ambitious recruitment goals across every department, with the aim of achieving a C-suite consisting of at least 40 percent women by 2020. The CEO’s commitment to Sodexo’s diversity goals has in turn driven deeper engagement in diversity and inclusion at all levels of the company. The result? Anand said that the division of Sodexo that she leads has realized $1 billion in new business that can be directly tied to the company’s diversity and inclusion efforts.

Set the Metrics for Innovation

Herndon defines innovation as “anything new that creates value.” The value of a more inclusive workforce will be revealed if specific business practices are established:

  • Tie recruiting metrics to the statistical makeup of the market the company serves—or seeks to serve.
  • Monitor if and how diverse talent is being cultivated through the leadership pipeline.
  • Establish new-business lines targeted to previously underserved populations and then track their success.
  • When planning strategy, challenge your board to keep diversity top of mind.

Work to Remove Biases

Goff noticed that workers at a company he consulted to performed with greater efficiency when paired with a coworker of the same race. These workers had little training in how to work with someone who was not from their own background, and when paired with a colleague of a different race, faced tensions that slowed their work.

To realize the full economic value of diversity and empower teams to do their best work together, companies should provide training in how to overcome unconscious biases and in how to be mindful of tensions caused by misunderstandings when evaluating workers’ performance. “Bias can be baked in,” Goff said. “If we define all the things we care about and measure based on them, we will see greater success.”

Inclusion Must Be Pervasive

Sepahban, who currently works closely with start-up companies and venture funders, said that while only 12 percent of venture capital is awarded to companies with diverse leadership, companies with at least one woman founder performed 63 percent better than those without a woman leader based on exit valuations.

To change the tide towards inclusion at start-ups and larger companies alike, Sepahban urged her fellow directors to make inclusion pervasive. “This isn’t someone else’s job,” she said. “Even with all the great work done by diversity leadership, it’s still everyone’s job. Leadership should educate all to ask themselves what they are doing to help.”

Identifying Obstacles to Board Diversity

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The final session of the Diversity Symposium at NACD’s 2015 Global Board Leaders’ Summit focused on the Report of the NACD Blue Ribbon Commission on the Diverse Board and how directors can implement recommendations from that report in their own boardrooms. Kapila Kapur Anand, a partner at KPMG LLP and the firm’s national partner-in-charge of Public Policy Business Initiatives, led the discussion with panelists that included Anthony K. Anderson, retired Ernst & Young LLP vice chair, executive board member, and Midwest and Pacific Southwest managing partner; The Hon. Cari M. Dominguez, a director at ManpowerGroup, Triple-S Management, Calvert SAGE Fund, and NACD; and Karen B. Greenbaum, president and CEO of the Association of Executive Search Consultants.

The Diverse Board: Moving from Interest to Action

As the Blue Ribbon Commission that produced this groundbreaking 2012 report observed:

[A] company’s ability to remain competitive will rely on its understanding of global markets, changing demographics, and customer expectations. Diversity is a business imperative, not just a social issue. The new business landscape will require boards to cast a wider net to find the very best talent available. As a natural corollary, the board’s mix of gender, ethnicity, and experiences will likely increase.

Dominguez noted that structural, social, and habitual barriers may prevent boards from becoming more diverse, and she offered this key advice: Don’t rely solely on the company’s CEO to lead this conversation. It’s the responsibility of every director to move the discussion forward.

So why aren’t boards as diverse as they could be? Greenbaum addressed this question by referring to data she collected via a survey of both boards and search firms. Her findings surfaced five issues:

  1. Candidate pool. Boards contended that it was difficult to find diverse candidates. Horn countered this claim by asserting that a failure to find qualified candidates is more a function of boards not searching correctly. Boards should demand that search firms provide a diverse list of candidates. Conversely, search firms take their cue from boards and expect them to be vocal about the importance of having a diverse candidate pool.
  2. Term limits. A lack of term limits results in a situation in which boards cannot be routinely refreshed with new directors. If term limits are restricting opportunities to bring on new talent, consider expanding the board.
  3. Experience: Boards resist adding members who are not current CEOs or CFOs. Boards need to be open to first-timers and should develop strong mentoring programs to bring newly minted directors into the fold.
  4. Succession planning: Build a pipeline of diverse talent in your own company so that these leaders can serve not only in your boardroom but also in those of other organizations.
  5. Status quo. Boards can become complacent about how they operate, especially when they feel no pressure from shareholders or other stakeholders to change.

“All of us must be conscious that this is a leadership issue,” Anderson said. “If the leadership of a company doesn’t believe in diversity initiatives, the ability to make much happen is grossly inhibited.” Companies with a diversity strategy that touches on leadership, employment, and procurement are reinforcing the importance of diversity as part of company culture, Anderson added..

Creating change takes time, effort, and formal processes. Putting diversity on the agenda may require a shift in thinking and habits, but, as all of the panelists agreed, diversity is a business imperative that will only grow in importance over the coming years.