Topics:   Board Composition,Corporate Governance,Leadership

Topics:   Board Composition,Corporate Governance,Leadership

August 27, 2019

Realizing the Value of Generational Diversity on Boards

August 27, 2019

As the topic of boardroom diversity has gained prominence over the years, considerable attention has been given to the value that women and minority representation can bring. For the most part, however, generational diversity hasn’t been discussed as much as other forms of diversity. This situation has recently started to change.

The 2018 US Spencer Stuart Board Index indicated that independent directors of S&P 500 companies are 63 years old on average. It also reported that 17 percent of new directors were age 50 and younger in 2018, up slightly from 16 percent the previous year. What is driving this trend? The Index indicates that some boards may be bringing on younger directors to obtain specialty skill sets and diverse perspectives. Others may be seeking not only to obtain particular skill sets but also to gain insight into what motivates customers and employees within certain demographic groups.

New Director Differences

It’s becoming clear that introducing more generational diversity into the boardroom is a priority, and that doing so may bring new perspectives, unique skills, and varied backgrounds into the board’s oversight role. But, if not managed properly, adding directors with different experiences and perspectives may not be as successful as hoped. For some time, new directors were automatically exposed to either their own boards or nonprofit boards through their C-suite experience. This often gave them an intrinsic understanding of the role of the board as well as a good sense of the information they would need from management in order to perform their roles.

As the search aperture widens beyond the C-suite, candidates may hold positions that are two or three layers down from the CEO or lower—or, they may come from academia, the military, government, or other nontraditional sources. This means they may not have had previous exposure to how corporate boards operate. Even though less-tenured directors can bring extremely desirable skills and capabilities, they may not be as familiar with the role of the board in terms of governance—particularly, the nuances of oversight versus management. Without this understanding, they can sometimes struggle to find their voices and to deliver meaningful insights. This suggests that more education and better onboarding may be required in order to enable new board members to contribute effectively.

Leading Practices for Generational Inclusivity

A first step in optimizing the contributions of directors of all ages is simply recognizing that there may be perceptual and experiential differences among different cohorts, and that some may be less savvy about the workings of a board than others. Mentorship and coaching are initial ways to bridge these differences, with more-tenured directors offering guidance to new directors on what is expected of them in a governance role. This includes suggesting strategies for adding value, such as how and when to lean in and add perspective.

Targeted committee assignments are another way of including less-tenured directors. For example, consider a new director who is deeply experienced in technology but less so in finance. The audit committee, which often has responsibility for overseeing technology risk, may invite that director to take a lead role on technology strategy or cybersecurity. This type of assignment can provide newcomers with an opportunity not only to showcase their strengths, but also to gain valuable insight into areas where they have less experience. There may also be opportunities outside the boardroom to invite members to offer their perspectives, such as meeting with employee councils or customer focus groups to explore talent strategies, product development, or consumer trends. Offering less-tenured directors specific, well-defined opportunities to add value within a more informal setting, such as a committee or working group, can help them form connections and feel more comfortable in larger meetings of the full board.

Although targeted assignments can be helpful in creating an inclusive culture, directors should bear in mind that newcomers can feel demoralized if they perceive that they’ve been brought in to “check a box” or if they are only valued for a specific attribute. Every director, regardless of age or experience level, should be valued for their ability to offer broad business insights as well as specific expertise. Accordingly, it is important not to let conscious or unconscious biases color one’s perceptions. Directors should be open to understanding each other’s experiences, skills and perspectives, so they truly allow each person to provide their own unique value.

In terms of generational differences, this need for unbiased openness goes both ways: one shouldn’t assume that an older person lacks certain capabilities just as one shouldn’t assume that a younger person possesses them. A classic example of this bias is the pervasive stereotype that older people don’t understand technology while younger people inherently do.  

Be Intentional About Realizing Potential

With boardroom diversity expanding today in all of its forms, performance and value of such diversity are increasingly about the “and”: It’s the skill set and the cultural fit. New members may need different ways of becoming effectively integrated onto the board than their more-tenured counterparts. As more boards intentionally pursue generational diversity for the value it might deliver, they should be equally intentional in creating an inclusive culture that allows this potential to be realized.

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

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