Category: Board Composition

Overcoming Unconscious Bias

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Ensuring that your board is broadly diverse—in every sense of that word—can and most likely is impeded by unconscious biases. The NACD-hosted Diversity Symposium yesterday opened the 2015 NACD Global Board Leaders’ Summit in Washington, D.C., with presentations from Judith Williams, global head of diversity at Dropbox, and former manager of the global diversity and talent programs at Google, and Howard Ross, founder and chief learning officer of Cook Ross, a consultancy that works specifically on inclusion issues.

Judith Williams and Howard Ross on Overcoming Unconscious Bias

Google, which lives and dies by data, wanted to understand where bias might exist in key decision-making processes so started its unconscious bias program in 2013. Google researched whether training was effective in helping employees mitigate unconscious bias, Williams recounted. One example: For interview processes, Google developed a tool that would generate questions based on role-related knowledge, leadership, and “Google-y-ness.” Questions such as, “Describe a situation where you went above and beyond to help a colleague” was a better gauge of that quality than asking “Where did you go to school and what is the highest degree that you have?” The question generator also created a rubric for rating the questions so that the interviewer would know what a great response looked like. To level the playing field even further, all candidates were asked the same slate of questions.

The question directors should ask themselves, said Ross, is not “is there bias?” but rather, “What biases do we have that keep us from making choices counter to the values that we say we believe in?”

In a business context, bias comes into play when looking at a candidate’s qualifications for a particular job. Here, the trick becomes looking beyond traditional qualifications that maintain the status quo, venturing out to find new, unique qualities that a candidate can bring to a role. For example, seeking candidates with a college degree is a standard criterion; however, this would mean that talented innovators like Steve Jobs or Bill Gates would never be called in for an interview.

Organizationally there are two things that companies can do to overcome making these snap judgments.

  1. Education. From the top down, everyone in an organization needs to understand the myriad distinctions among people in the workplace and the mechanics of unconscious bias. By keying employees in to how people think results in more egalitarian behaviors across the organization.
  2. Systems and structures: Closely examine company processes to discover how they are susceptible to unconscious bias. For example, look at how are resumes collected and screened. Before they go to a hiring manager for review, could names or other markers be removed so as not to trigger biases? Also, look at where breakdowns in the company’s various systems can and do occur.

Williams also stressed that, when thinking about problem solving, consider who is asking the questions. For example, Google was designing mobile products for state-of-the-art smartphones; however, in developing parts of the world where mobile device use is high, those users are not working with high-end equipment. In other words, Google was missing a substantial portion of a potential consumer base. Now the company operates on the idea that its next billion users are not going to be exactly the same as its last billion users, and figuring out the characteristics of this evolving consumer base requires innovative and free flowing dialog. Business leaders in both the C-suite and the boardroom need to identify and overcome their unconscious biases because if they fail to bring a variety of perspectives to the table, no one will be asking the kinds of questions that will lead to the next big business opportunity.

Jesse Rhodes is the associate editor of NACD Directorship magazine.

Boardroom Diversity: There is Work to Be Done

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In all my years as a director, I have found that boards with the most gumption, versatility, and innovative force share one common attribute: diversity.

When we embrace diversity—of gender, race, culture, or perspective—we stretch our minds and transcend the limits of our own experience. These actions empower us to think, and to lead, “beyond borders.”

Diversity has become a global business imperative, and I am delighted by the work being done by my friends and esteemed colleagues at the National Association of Corporate Directors (NACD) to promote all types of diversity in the boardroom.

The 2015 Global Board Leaders’ Summit will open with NACD’s first-ever Diversity Symposium, which will take place on September 26 from 12:30 to 5:30 p.m. Discussion at the Symposium will focus on the following topics:

  • Unconscious Bias — Less than 15 percent of American men are over 6-feet tall, yet almost 60 percent of CEOs are taller than 6 feet. Unconscious biases like the one implied by this pair of statistics can significantly influence how we think and make decisions. Leaving such biases at the door can create space for new talent and innovative ideas.
  • Case Study: The Rooney Rule — The 2003 Rooney Rule requires NFL teams to interview minority candidates for head-coaching and other top-level positions, and over the past 12 years its implementation has dramatically increased diversity on NFL coaching and front-office staffs. How might this rule inspire new practices in the boardroom?
  • Meet the 21st-Century Board — In order to compete globally, companies will need to recruit a new breed of director. Who are the directors that will form this boardroom vanguard? What skills do they possess? And where can they be found?
  • The Diverse Board: Moving From Interest to Action — With findings in the Report of the NACD Blue Ribbon Commission on The Diverse Board as their starting point, seasoned directors and experts will discuss specific, actionable steps you can take to optimize the composition of your board.

The business world is not the same as it was 30, 10, or even 5 years ago. Today’s boardroom is a reflection of the changes that have occurred in the marketplace and in society at large. Much progress has been made in incorporating new perspectives and heterogeneous backgrounds into the sphere of corporate directorship, but we have much work yet to do.

Join me and NACD in going “beyond borders” and championing the ideals that will change the boardroom, our companies, and the global economy for the better.

Prepare to gain unexpected connections, insights, and inspiration.

2015 NACD Global Board Leaders’ Summit | Beyond Borders. Leadership Evolved.
September 26–29, Washington DC

For more information about the NACD Global Board Leaders’ Summit, visit www.NACDonline.org/Summit.

Succession Planning is Your Best Defense Against Activism

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For good or ill, activists now are important players in the investor ecology, with increasingly successful records for changing a board’s makeup. At Egon Zehnder, we identified 58 incidents of investor activism against S&P 500 companies over the last two years. Of those, 16 contests involved changes to board composition, urging a “no” vote on the management’s slate of directors or proposing, or threatening to propose, an alternative slate. And of those, only six concluded in favor of management, resulting from the activist slate being withdrawn before a vote or management’s victory in a vote.

It is not surprising, then, that many boards are evaluating their plans for responding to an activist slate this proxy season. Broadly speaking, however, there are really only two possible courses of action a board can take. One path is to accept the reality of activist scrutiny and build it into the nominating committee’s ongoing work. The nominating committee needs to look at the board with an objective eye and identify how its composition might give an activist a foothold, such as directors with conspicuously long tenures or directors whose experience is unaligned with the company’s business and its strategic direction. The nominating committee must then design a director succession plan that identifies, cultivates, and elects candidates with the desired competencies. Doing so is not a guarantee against activist action, but having a carefully chosen board with relevant backgrounds and perspectives deprives activists of a clear weakness to exploit.

Because board seats turn over intermittently and because competition for directors is so high, fully executing this strategy can take several years. In the meantime, an activist investor may well decide to put forth its own slate. When that happens, the nominating committee must shift into high gear. In the 16 activist initiatives involving changes to board composition, the median campaign length was found to be only 77 days—just 11 weeks from the initial announcement to some sort of resolution. And six of those 16 initiatives concluded in less than one month.

Of course, the company could stick with its current slate and hope it receives the necessary votes. But once activists have sown the seeds of doubt in the minds of other investors, events have shown that change is more or less preordained. It is simply a matter of whose change will prevail.

Because time is of the essence when faced with an activist slate, it is incumbent upon boards to watch closely for tremors that might precede such an action. Besieged boards might feel blindsided, but successful activist attacks rarely come out of the blue. Seven of the companies that were subject to investor activism on board composition were the targets of initiatives from more than one group. For example, while Starboard’s Jeff Smith may be the one credited with replacing the Darden board, that upheaval only followed an initial salvo from Barrington Capital Group. Once the board gets the faintest sense that it is the object of activist interest, it needs to move quickly to examine its composition and reshape it as needed.

When the battle is joined, boards must ensure they do two things. First, they must reach beyond their usual networks in identifying new director candidates. Expanded networks are more likely to allow the board to draw upon candidates with a wider range of perspectives and experiences. Furthermore, the wider pool of candidates (and connections to candidates) is essential if a company can hope to quickly assemble a slate that doesn’t look quickly assembled.

Once the company has its nominees, it then must convince the investor community to give its support. Here it is particularly helpful to steal a page from the activist playbook. Activists know that no matter how good their slate may be, their real power lies in their ability to sway a majority of investors to their side. As a result, the best activists are also the best communicators. They make sure that the story they tell is clear and compelling and then tell that story relentlessly. If management has been less than successful, it is because they have been out-maneuvered in the court of investor opinion. Management must make sure that the story they tell about their slate is even more compelling than that put forth in support of the activist candidates, and it must be told with the same energy and clarity.

The bottom line is that nominating committees must build strong director succession plans that result in boards that are clearly relevant for the challenges and opportunities the business is facing. Their only choice is whether to do so preemptively and with the luxury of time or, instead, with their back to the wall and the clock ticking.

George L. Davis co-leads Egon Zehnder’s Global Board Practice and is a trusted advisor across a host of corporate governance matters, with particular focus on leadership succession planning and board effectiveness. Kim Van Der Zon leads the U.S. Board Practice of Egon Zehnder International and has expertise in CEO succession. She has successfully served Fortune 500 clients across a broad spectrum of global companies from financial services and consumer packaged goods to pharmaceuticals and technology.