Topics:   Board Composition,Corporate Governance,Leadership

Topics:   Board Composition,Corporate Governance,Leadership

April 23, 2019

Diversity and Inclusion: Why Boards Need Both

April 23, 2019

Corporate and nonprofit boards have been focused on improving diversity within their ranks for years—and the needle is moving. According to the Missing Pieces Report from Deloitte and the Alliance for Board Diversity, the percentage of women on Fortune 500 boards rose to 22.5 percent in 2018, up from 15.7 percent at the start of this decade. People of color on Fortune 500 boards increased from 12.8 percent in 2010 to 16.1 percent in 2018.

There remains little debate that driving diversity on corporate boards should continue to be an important priority; nevertheless, it is becoming increasingly evident that improving diversity without also enhancing inclusion is suboptimal, if not counterproductive. Research indicates that teams perform better, displaying less groupthink and more innovation, when they are both diverse and inclusive. This principle also applies to boards: high-performing boards are more likely to exhibit gender balance and inclusive behaviors than low-performing boards. 

Today, the importance of inclusion is tacitly reflected in our business lingo, with “diversity and inclusion” now commonly spoken as a single phrase. However, though the terms are often used interchangeably, they are not one and the same. Understanding the difference may be the starting point for building teams that are more likely to produce better business outcomes:

  • Diversity denotes a wide range of characteristics, seen and unseen, which people were born with or have acquired. These characteristics may include gender, race, ethnicity, military or veteran status, sexual orientation, disability status, generational cohort, functional expertise, and more. 
  • Inclusion refers to the practice of making all members of an organization feel welcomed and giving them equal opportunity to connect, belong, and grow—to contribute to the organization, advance their skill sets and careers, and feel comfortable and confident being their authentic selves. 

The main difference between the two is that diversity is about traits, while inclusion is about behavior and how people feel about and toward one another. With this in mind, it is simple to see why diversity has been the focal point of corporate governance thus far: it is easier to measure.

Advancing inclusion may seem like a nebulous task, but it is possible for boards to model, exemplify, and ultimately to govern, inclusion. One of the first steps is to identify inclusive behaviors. Although every organization is different, Deloitte has identified six signature traits of inclusive leadership: commitment, courage, cognizance, curiosity, cultural intelligence, and collaboration.

Though all of these traits are important and interrelated, two of them, cognizance and courage, are particularly relevant to unleashing the power of diverse perspectives in the boardroom. Cognizance refers to being self-aware that you may be approaching a topic with a pre-conceived notion, fixed point of view, or an unconscious bias toward a group or individual. Without cognizance, people often rush into decisions before exploring all of the alternatives. They are also more prone to groupthink and confirmation bias. Inclusive leaders see the link between cognizance and objectivity. Accordingly, they seek to learn about their own tendencies and unconscious biases as well as those of the group, and they develop corrective strategies.  

Like cognizance, courage is also needed to remain objective in a group setting. Inclusive leaders have the courage to speak up and challenge the status quo. Often, a lone voice that calls out a blind spot or an entrenched pattern is all that stands between a successful decision and a potentially disastrous one. Inclusive leaders also display another type of bravery. They have the courage to speak about their own strengths and weaknesses. By revealing their true selves with humility and grace, they inspire others to do the same. 

In general, inclusive leaders apply the six signature traits to make people feel valued and comfortable in expressing their authentic selves. They do this by recognizing people’s unique characteristics, mitigating unconscious biases stemming from stereotypes, and leveraging the thinking of diverse groups of individuals for greater innovation and smarter decision-making. Ultimately, boards should not only seek to model these behaviors but also to hold management accountable for developing inclusive cultures.

The good news is that many directors already possess these qualities; they just may need to be more intentional in applying them. For example, mentoring new directors often occurs through informal interactions, but why leave it to chance?

  • A board chair or lead director could deliberately match newcomers with tenured members through a formal mentoring program. Mentors would be charged with providing historical context to new members, offering a sounding board for their ideas, and suggesting strategies for leveraging their unique strengths and skills to make the most impact in the boardroom.
  • Boards may also wish to consider assigning more direct responsibility for overseeing both diversity and inclusion at the company and within the board itself. 

Boards already know how to be intentional about seeking out individuals who would bring a variety of backgrounds, perspectives, and skills. Now they need to be just as intentional in creating an environment that enables those diverse voices to be heard—both within their boardroom and throughout the company.

Deb DeHaas is a vice chair and national managing partner, Center for Board Effectiveness, Deloitte.

As used above, Deloitte refers to a US member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (DTTL). This article contains general information only and Deloitte is not, by means of this article, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this article. Copyright ©2019 Deloitte Development LLC

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